UNITED STATES BANKRUPTCY COURT FOR THE WESTERN … · Leslie M. Kelleher ([email protected]) James P. Wehner (jwehner@capdale) One Thomas Circle, N.W. Washington, DC 20005 . Telephone:

UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA

Charlotte Division : In re: : Case No. 10-BK-31607 : GARLOCK SEALING : Chapter 11 TECHNOLOGIES, LLC, et al., : : Jointly Administered Debtors.1

: :

PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW SUBMITTED BY THE OFFICIAL COMMITTEE OF ASBESTOS

PERSONAL INJURY CLAIMANTS FOR THE ESTIMATION OF MESOTHELIOMA CLAIMS

[FILED UNDER SEAL]

The Official Committee of Asbestos Personal Injury Claimants, by and through its

counsel, hereby submits the Proposed Findings of Fact and Conclusions of Law set forth below

for the estimation of pending and future mesothelioma claims against Garlock.2

1 The Debtors are Garlock Sealing Technologies LLC, Garrison Litigation Management Group, Ltd., and The Anchor Packing Company. 2 The FCR joins with paragraphs 17-20 and 121-132 of the findings of fact and paragraphs 203-205 and 208 of the conclusions of law set forth herein, which relate to the testimony of his expert witnesses.

Case 10-31607 Doc 4474 Filed 04/02/15 Entered 04/02/15 17:03:54 Desc Main Document Page 1 of 105

Respectfully submitted,

Dated: November 1, 2013

CAPLIN & DRYSDALE, CHARTERED /s/ Trevor W. Swett Trevor W. Swett III ([email protected]) Leslie M. Kelleher ([email protected]) James P. Wehner (jwehner@capdale) One Thomas Circle, N.W. Washington, DC 20005 Telephone: (202) 862-5000

Elihu Inselbuch ([email protected]) 600 Lexington Avenue, 21st Floor New York, NY 10022 Telephone: (212) 379-0005 MOON WRIGHT & HOUSTON, PLLC /s/ Travis W. Moon Travis W. Moon ([email protected]) 227 West Trade Street Suite 1800 Charlotte, NC 28202 Telephone: (704) 944-6560 Co-Counsel for the Official Committee of Asbestos Personal Injury Claimants

MOTLEY RICE LLC /s/ Nathan D. Finch Nathan D. Finch ([email protected]) 1000 Potomac Street, N.W. Suite 150 Washington, DC 20007 Telephone: (202) 232-5504 WATERS KRAUS & PAUL /s/ Jonathan A. George Jonathan A. George ([email protected]) Scott L. Frost ([email protected]) 222 N. Sepulveda Blvd. Suite 1900 El Segundo, CA 90245 Telephone: (310) 414-8146 Special Litigation Counsel for the Official Committee of Asbestos Personal Injury Claimants


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TABLE OF CONTENTS

I. FINDINGS OF FACT....................................................................................................1

A. The Evidentiary Record .....................................................................................1

i. Experts on Estimation and Related Financial and Economic Topics ....4

ii. Fact Witnesses and Experts on Asbestos Litigation and Related Bankruptcy Topics ...............................................................................18

iii. Experts on Scientific and Medical Topics ...........................................34

B. Garlock’s Manufacture and Sale of Asbestos Products ...................................50

C. Garlock’s Asbestos Litigation History.............................................................54

D. Garlock’s Management of Asbestos Liability .................................................58

E. Garlock’s Prepetition Estimates of Liability....................................................63

F. Expert Estimates of Aggregate Liability for Mesothelioma Claims ................64

i. Dr. Mark A. Peterson ...........................................................................64

ii. Dr. Francine Rabinovitz .......................................................................69

iii. Dr. Charles Bates .................................................................................77

G. Medical and Science Issues .............................................................................84

i. Asbestos Released by Garlock Products ..............................................84

ii. Exposure to Other Asbestos Products ..................................................87

iii. Effects of Exposure to Asbestos from Garlock Products .....................88

II. CONCLUSIONS OF LAW .........................................................................................97

A. Daubert and Other Evidentiary Issues .............................................................97

B. Legal Framework of Estimate ..........................................................................97

C. Estimate of Aggregate Liability for Mesothelioma Claims ...........................100

D. Medical and Science Issues ...........................................................................102

E. Conclusion .....................................................................................................102


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This matter comes before the Court on the estimation in the aggregate of pending and

future mesothelioma claims against Garlock Sealing Technologies, LLC (“Garlock”). The

Court has reviewed all of the briefs and supporting materials filed by Garlock, its parent

company Coltec Industries, Inc. (“Coltec”), the Official Committee of Asbestos Personal Injury

Claimants (the “Committee”), and Joseph W. Grier, III, as the legal representative for the future

asbestos claimants (the “FCR”); has heard oral arguments of counsel and the testimony of fact

and expert witnesses who testified during the seventeen-day estimation hearing held July 22,

2013 to August 22, 2013 (the “Hearing”); and has considered the exhibits and other materials

admitted into evidence or otherwise submitted for consideration by the Court. After due

deliberation, the Court hereby makes the following Findings of Fact and Conclusions of Law:3

I. FINDINGS OF FACT

A. The Evidentiary Record

1. The Court heard live testimony from Charles Wasson, David Garabrant, Thomas

Sporn, Larry Liukonen, Frederick Boelter, John Henshaw, David Weill, Lester Brickman, Joseph

Radecki, Richard Magee, William Longo, James Shoemaker, Philip Templin, Arnold Brody,

Carl Brodkin, Laura Welch, John Turlik, Jorge Gallardo-García, Charles Bates, Paul Hanly,

David McClain, Joseph Rice, James Patton, Mark Peterson, Francine Rabinovitz, James

Heckman, Elizabeth Anderson, Lambertus Hesselink, and David Glaspy.

2. Pursuant to a stipulated order, the expert reports (both initial and rebuttal reports)

of the parties’ respective financial experts (Karl N. Snow for Garlock, Kenneth W. McGraw for

the Committee, and Joseph J. Radecki for the FCR) have been admitted into evidence, along with

3 Any matter set forth below as a finding of fact that would more properly be considered a conclusion of law is hereby adopted as such, and vice versa.


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the depositions of those witnesses. Stipulation and Order Regarding Testimony of Certain

Financial Experts, entered on Sept. 17, 2013 [Dkt. No. 3125].

3. The testimony of the following witnesses has been presented to the Court by

designations of depositions or prior court testimony: David Durham, Walter Overstreet, Roy

Whittaker, Jimmy Gene Ward, Harry Joe Hyder, Lester Borgen, Ronald Isaacs, Elmer Royer,

Robert Maney, Robert Hill, Theodore Cichocki, Jack McNutt, James Heffron, Harold Seltzer,

John Sunday, Charles Oxley, James Prange, Bernard Duman, Simon Greenstone 30(b)(6)

(Jeffrey Simon), Paul Grant, Elizabeth Barry, Christopher Drake, Brian Henzel, Michael

Shepard, Gary Kendall, Belluck & Fox 30(b)(6) (Joseph Belluck), John Dement, Peter Infante,

Rust Consulting 30(b)(6) (Rebecca Blake), Rust Consulting 30(b)(6) (Justin Parks), Williams

Kherkher 30(b)(6) (Troy Chandler), Melissa Ferrell, Waters & Kraus 30(b)(6) (Peter Kraus),

Mark Iola, Shein Law Center 30(b)(6) (Benjamin Shein), Robert Phillips, Tim Hennessy,

Richard Magee, Garlock 30(b)(6) (James Heffron), Garlock 30(b)(6) (Tim Hennessy), Garlock

30(b)(6) (Richard Magee), The David Law Firm 30(b)(6) (Stephen Cooper), Ernest Schaub, Tim

O’Reilly, William Mahoney, Jeffrey Simon, Samantha Flores, Charles Finley, Julie Strange,

Raymond Harris, Roger R. Beckett, Joseph Radecki, and Karl Snow.

4. Garlock has also offered the expert report and deposition testimony of George L.

Priest, an expert witness, arguing that, although he sat for deposition despite illness, the illness

rendered him unavailable to attend the trial. Professor Priest’s report, like that of the other

experts, constitutes inadmissible hearsay,4

4 At the Hearing, the parties generally agreed that expert reports constitute hearsay that is inadmissible as substantive evidence and may be considered only for the determination of preliminary evidentiary questions pursuant to Fed. R. Evid. 104(a).

and Garlock has not made a sufficient showing of

unavailability to make it proper to admit his deposition transcript in lieu of live testimony. In the


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absence of in-person testimony, moreover, Professor Priest’s opinions would not be sufficiently

helpful to the Court as trier of fact to warrant admitting his report or deposition over objection.

See Fed. R. Evid. 702; see also Bell v. CSX Transp., Inc., 2002 WL 34714566, at *3 (E.D. Mich.

Apr. 4, 2001) (excluding opinions of expert asserted to have been unavailable for trial).

5. The parties have submitted a large amount of documentary evidence. In addition

to exhibits introduced or referred to at the hearing, Garlock, the Committee and the FCR have

each offered large categories of documents gathered in discovery in this proceeding.

6. The following discussion of the testimony given by various witnesses who took

the stand at the Hearing, and of the financial experts who testified by deposition, is not meant as

a comprehensive restatement of their testimony, but rather as a high-level summary intended to

memorialize the identity of each witness, the main subjects he or she addressed, and key points

emerging from the testimony. Further particulars of the testimony are cited in connection with

the specific proposed findings set out in a later section of these findings.


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(i) Experts on Estimation and Related Financial and Economic Topics

Called by Garlock

7. Charles E. Bates, Ph.D. an economist and an econometrician,5 is the co-founder

of the consulting firm Bates White LLC (“Bates White”). Dr. Bates was admitted to testify as

an expert in economics, econometrics, and asbestos-claim estimation.6 Garlock asked Dr. Bates

to analyze the relationship between Garlock’s settlements and its “legal liability,” as defined by

Garlock’s counsel; to forecast Garlock’s liability as thus defined for pending and future unknown

mesothelioma claims; and to determine whether Garlock’s proposed funding would be sufficient

under its proposed plan of reorganization.7

8. Dr. Bates opined that Garlock’s historical settlements amounted to multiples of its

“legal liability,” because it settled cases, not because of any prospect of being found liable, but to

avoid greater costs of defense.

Recalled by Garlock as a rebuttal witness, Dr. Bates

gave a critique of the estimates offered by Drs. Rabinovitz and Peterson.

8 On stated assumptions, he estimated Garlock’s “legal liability”

for present mesothelioma claims as less than $25 million and for future mesothelioma claims as

less than $100 million.9 By comparison to these estimates, Dr. Bates expressed confidence that

the funding Garlock proposes for its plan (assertedly, $270 million) would be adequate (and

indeed, that claimants would uniformly choose the “Settlement Option” rather than the

“Litigation Option” under that plan).10

5 Hr’g Tr. 2706:17-2707:4, Aug. 2, 2013 (Bates).

6 Id. at 2734:14-16, 22-23. 7 Id. at 2704:19-2705:4, 2705:6-9. 8 Id. at 2705:6-9, 2735:8-14, 2760:12-21. 9 Hr’g Tr. 2921:5-19, 2974:5-9, Aug. 5, 2013 (Bates). 10 Hr’g Tr. 2833:23-25, 2846:13-17, 2850:19-22, Aug. 2, 2013 (Bates).


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9. The express assumptions underlying Dr. Bates’ “legal liability” estimate are that

(1) all claims against Garlock would be litigated to conclusion against it and all other responsible

entities, (2) the trial court would admit all evidence presented by the litigants on the issue of

causation, rather than excluding any such evidence under Daubert or similar limitations, and (3)

all exposure evidence known or reasonably available to the plaintiff and plaintiff’s counsel

would be presented.11 His analysis ignores the massive defense costs that adopting trial, rather

than consensual resolutions, as the mode of valuing claims would entail.12

10. Dr. Bates described an elaborate series of steps by which he purported to value

separately each pending and future claim. Using information gleaned from press accounts of

some 367 verdicts won by prevailing plaintiffs (mostly in cases not involving Garlock), he

derived assumptions about the total amount of damages that would be awarded to mesothelioma

claimants prevailing against any defendant at trial.

13 He then applied a series of assumptions and

conclusions that taken together, exonerated Garlock of fully 99 percent of the aggregate liability

that he calculated would result from trying all of the claims to conclusion, ignoring the defense

costs that trials would impose.14

11. In addressing pending claims, Dr. Bates excluded approximately 33 percent of the

claims that Garlock’s affiliate and co-debtor, Garrison Litigation Management Group Ltd.

11 Id. at 2771:7-2772:3. 12 In Garlock’s actual experience, defense costs fluctuated in the range of 25 percent of its total asbestos-related expenditures in the period 2003-2010. See ACC-159. In the five years preceding its bankruptcy, for instance, Garlock spent roughly $140 million in defense costs. See FCR-36 (chart summarizing defense costs). Of course, that level of expense, was in the context of a claims management approach in which Garlock tried only a trivial percentage of the claims against it, settling the bulk of them and dismissing without payment those unsupported by product exposure evidence. Hr’g Tr. 2918:22-2919:4, Aug. 5, 2013 (Bates). 13 Hr’g Tr. 3908:7-3909:3, Aug. 8, 2013 (Peterson). 14 Id. at 3909:11-3912:11; see also Hr’g Tr. 2980:21-25, Aug. 5, 2013 (Bates).


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(“Garrison”) recorded as mesothelioma claims in the historical claims database that it

maintained for Garlock (the “Garrison Database”).15 His rationale for doing so was that some

responses given by the holders of those claims to questionnaires issued by Garlock in this

proceeding showed that the excluded claims are not for mesothelioma or have been withdrawn.16

Dr. Bates valued the remaining pending claims by applying a regression analysis that varied the

result according to the state in which the claim was filed, the claimant’s age at the time of filing,

and his or her life status (i.e., living or dead) at that time.17 Dr. Bates then assigned a zero value

for those claims for which Bates White’s review of the questionnaire responses and associated

materials indicated that the claimants did not assert any contact with Garlock products.18 For

projected future claims, his regression analysis employed the state of filing as the sole variable.19

For both pending and future claims, Dr. Bates made the assumption that claimants would win no

more than 8 percent (and probably less) of trials against Garlock, because that was the “win rate”

of claimants who went to verdict against Garlock in the 1990s, when insulation manufacturers

were joined in the actions.20 Dr. Bates also opined that Garlock would be responsible for just

1/36th of the few verdicts that would be rendered against it.21

12. In constructing the future stream of Garlock’s “legal liabilities,” Dr. Bates relied

on the “Nicholson-KPMG-Bates White” epidemiological prediction of the incidence of

15 Hr’g Tr. 2926:25-2927:7, Aug. 5, 2013 (Bates). 16 Hr’g Tr. 2633:8-2634:1, Aug. 2, 2013 (Gallardo-García). 17 Hr’g Tr. 2927:8-13, Aug. 5, 2013 (Bates). 18 Id. at 2928:4-19. 19 Id. at 2975:3-10. 20 Id. at 2956:10-23, 2975:11-14; see also Hr’g Tr. 3911:24-3912:8, Aug. 8, 2013 (Peterson). 21 Hr’g Tr. 2936:18-25, Aug. 5, 2013 (Bates); see also Hr’g Tr. 2796:5-17, Aug. 2, 2013 (Bates).


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mesothelioma in the United States.22 This approach to forecasting the number and timing of

future diagnoses of mesothelioma to be made in the United States derives from a famous study

by Dr. William Nicholson, but incorporates adjustments to that study by a consulting group at

KPMG (of which Dr. Bates formerly was a member) and further adjustments by Bates White

itself.23 The Bates White adjustment treats roughly one-third of future mesothelioma incidence

as having no connection to asbestos, but instead as “idiopathic” in origin.24 In translating his

forecasted stream of Garlock liabilities to net present value, Dr. Bates applied an inflation

adjustment of 2.5 percent per annum and discounted the resulting figures at 5.575 percent, which

he termed a “risk free rate” based on the Congressional Budget Office’s long-term assumptions

about inflation and discounting.25

13. Dr. Bates acknowledged that no court has ever adopted his estimation approach

26

and that this approach has only been proposed in one other case—the recent estimation

conducted in Bondex, where Judge Fitzgerald rejected it.27 Although his estimate was geared to

determining what Garlock would owe if claims against it were tried under certain conditions, Dr.

Bates admitted that less than one percent of Garlock’s cases went to verdict, and that verdicts are

neither random nor representative.28

22 Hr’g Tr. 2720:4-7, 2818:15-18, Aug. 2, 2013 (Bates).

Dr. Bates advocated the idea that, in estimation, the

bankruptcy court should substitute an “alternative information regime” for the tort system as it

23 Hr’g Tr. 3890:21-3891:5, 3912:23-3913:5, Aug. 8, 2013 (Peterson); Hr’g Tr. 2720:24-2721:7, Aug. 2, 2013 (Bates). 24 Hr’g Tr. 3913:9-3914:5, Aug. 8, 2013 (Peterson). 25 Hr’g Tr. 2774:17-2775:3, Aug. 2, 2013 (Bates). 26 Hr’g Tr. 2992:2-11, Aug. 5, 2013 (Bates). 27 Id. at 2875:13-2876:18. 28 Id. at 2918:15-2919:4, 2920:20-22.


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actually exists.29 Dr. Bates, however, did not rely on any of Garlock’s medical or scientific

defenses in reaching his conclusions.30

14. As foundation for his opinions, Dr. Bates rests on a collection of data assembled

by Bates White in what was referred to as the “Garlock Analytical Database.” A second Bates

White representative, Jorge Raúl Gallardo-García, Ph.D., testified that he was responsible for

supervising the construction of that database,

31 which includes the Garrison Database as well as

other information and discovery materials that Bates White received for use in the estimation

proceeding.32 Dr. Gallardo-García was admitted as an expert in statistical analysis, economic

modeling and the construction of databases for those tasks.33 He testified that the Garlock

Analytical Database meets statistical standards of reliability for the work that Dr. Bates

performed in this case.34

15. Dr. Gallardo-García admitted that in its prepetition estimation work for EnPro

Industries Inc. (Garlock’s ultimate shareholder) (“EnPro”), Bates White followed a more

conventional methodology to make “a reliable and reasonable estimate of the aggregate amount

of money that Garlock will require to satisfy present and future mesothelioma claims,” looking at

Garlock’s prior claims history and what the company paid in the tort system to resolve those

claims, and relying on the Garrison Database.

35

29 Hr’g Tr. 4846:15-25, Aug. 22, 2013 (Bates).

He testified that the Garrison Database is robust

30 Hr’g Tr. 2903:11-25, Aug. 5, 2013 (Bates). 31 Hr’g Tr. 2612:4-5, 2619:19-2620:5, Aug. 2, 2013 (Gallardo-García). 32 Id. at 2624:4-9, 2625:5-2636:10. 33 Id. at 2617:14-17, 2619:12-13. 34 Id. at 2620:16-20. 35 Id. at 2666:8-19, 2667:15-2668:18.


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and contains a significant amount of information.36 He explained that in the estimation

proceeding, however, Dr. Bates is measuring something different.37 Dr. Gallardo-García

returned to the stand as a rebuttal witness and testified that he found errors in the analytical

databases of Drs. Peterson and Rabinovitz,38 flowing chiefly from their use of Garlock’s

historical claims information rather than data preferred by Bates White and their coding of

certain data in ways that Dr. Gallardo-García deemed incorrect.39

16. Karl N. Snow, Ph.D. is an economist at Bates White and works in the areas of

finance and economics. Although Dr. Bates acknowledges the need to use a risk-free rate for

discounting the estimates to net present value, Dr. Snow argued for two alternative discount

rates, both of which embody significant credit risk or investment risk rather than simply taking

account of the time value of money. First, Dr. Snow offered Garlock’s weighted average cost of

capital (“WACC”), which measures the company’s funding costs in light of its capital structure

and credit profile.

40 Next, Dr. Snow pointed to the investment returns earned by pension funds,

which he analogized to Section 524(g) trusts.41

36 Hr’g Tr. 2647:18-25, 2679:7-15, Aug. 2, 2013 (Gallardo-García).

Finally, Dr. Snow criticized the financial experts

for the Committee and the FCR for accepting a long-term average rate of inflation but insisting

on market-based measures of the risk-free rate for discounting purposes, rather than relying on

37 Id. at 2624:19-22. 38 Hr’g Tr. 4680:2-8, Aug. 22, 2013 (Gallardo-García). 39 Id. 40 Rebuttal Report of Karl N. Snow, Ph.D at 31-23, dated April 23, 2013 (“Snow Rebuttal Report”) (GST-7239). See ¶ 2, supra. 41 Id. at 32-40.


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the long-term average yield on Treasury securities as projected by the Congressional Budget

Office.42

Called by the FCR

17. Dr. Francine Rabinovitz is the asbestos personal injury claims estimation expert

for the FCR.43 She has experience as an expert witness in bankruptcy estimation proceedings,

has projected asbestos personal injury liabilities in other contexts (including for courts,

defendants, solvent companies, trusts, and claims facilities), and is a leading expert in her field.44

Dr. Rabinovitz has also been recognized as an expert by various courts, and her estimations of

the number and value of claims have been adopted in several cases.45 Dr. Rabinovitz was

qualified by the Court as an expert in the estimation of asbestos claims and liabilities, subject to

Garlock’s Daubert objection.46

18. Dr. Rabinovitz testified as to the amount of money Garlock will require to satisfy

present and future mesothelioma claims and criticized Dr. Bates’ methodology and

conclusions.

47 Dr. Rabinovitz’s estimation methodology, which is similar to that of Dr.

Peterson, began with an estimate of the size of the population exposed to asbestos.48

42 Id. at 29-30.

Next, Dr.

Rabinovitz estimated the proportion of persons exposed to asbestos who will develop

43 Hr’g Tr. 4146:16-19, Aug. 9, 2013 (Rabinovitz). 44 Id. at 4150:5-4155:1, 4157:1-4160:12. 45 Id. at 4160:23-4162:25. 46 Id. at 4163:16-22. See Future Asbestos Claimants’ Representative’s Opposition to Debtors’ Motion to Exclude or Strike Committee and FCR Estimation Expert Witness Opinions, filed on Sept. 27, 2013 [Dkt. No. 3145]. 47 Hr’g Tr. 4147:11-19, 4164:15-19, Aug. 9, 2013 (Rabinovitz). 48 Id. at 4173:25-4174:5.


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mesothelioma.49 Dr. Rabinovitz then forecasted the percentage of this population that is likely to

file mesothelioma claims against Garlock in the future, known as the “propensity to sue.”50 Dr.

Rabinovitz valued Garlock’s pending and future mesothelioma claims by calculating the average

indemnity value during a five-year calibration period from 2005 to 2010.51 Dr. Rabinovitz also

estimated the cost of defending asbestos claims by calculating the defense cost share percentage

of mesothelioma and lung cancer indemnities, and then applying that percentage to pending and

future liability estimates.52 Finally, using information from the Congressional Budget Office

provided by the FCR’s financial advisor, Mr. Joseph Radecki, Dr. Rabinovitz adjusted the future

mesothelioma claims for inflation, applying a rate of between 1.0 percent and 2.3 percent

(depending on the year) for her base case and between .50 percent and 1.8 percent (depending on

the year) for her adjusted indemnity case.53 Dr. Rabinovitz then applied a risk-free discount rate

of 2.81 percent, which was also provided by Mr. Radecki and was based on yields in the market

for U.S. Treasuries, to determine the net present value of the claims as of the petition date.54

19. Dr. Rabinovitz estimated that the amount of money that Garlock will need to

resolve pending and future mesothelioma claims is approximately $1.217 billion to $1.292

billion net present value, including defense costs.

55

49 Id. at 4178:14-21.

Exclusive of defense costs, Dr. Rabinovitz’s

estimate is between $913.4 million and $969.5 million.

50 Id. at 4180:11-16. 51 Id. at 4186:1-5. 52 Id. at 4191:13-4192:13. 53 Id. at 4195:25-4196:9; FCR-42, at 34 (Rabinovitz Demonstrative PowerPoint). 54 Hr’g Tr. 4195:25-4196:9, 4197:7-24, Aug. 9, 2013 (Rabinovitz). 55 Id. at 4222:21-23.


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20. Mr. Joseph Radecki is a Managing Director of Lincoln International, a global

investment bank, and the FCR’s financial advisor in this case.56 Mr. Radecki was accepted,

without objection, as an expert in determining appropriate inflation and discount rates for net

present value calculations.57 Mr. Radecki testified regarding the appropriate inflation rate for Dr.

Rabinovitz to use in calculating the undiscounted amounts of Garlock’s future mesothelioma

liabilities in her base case.58 Mr. Radecki also testified regarding the appropriate discount rate

for use in converting the nominal amounts of the future mesothelioma liabilities in Dr.

Rabinovitz’s projection to net present values. Mr. Radecki testified that he determined the

appropriate “risk-free” discount rate in this case by identifying the point on the yield curve for

U.S. Treasury securities that correlates to the “weighted average life” of the future mesothelioma

liabilities in Dr. Rabinovitz’s projection.59

56 Hr’g Tr. 1340:10-1341:5, July, 26, 2013 (Radecki).

57 Id. at 1345:9-13. 58 Id. at 1346:11-20. 59 Id. at 1349:19-1350:9, 1352:17-18, 1353:7-13.


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Called by the Committee

21. Mark A. Peterson, Ph.D. is the Committee’s asbestos personal injury claims

estimation expert and a recognized expert in the field of mass tort estimation. Educated as a

lawyer and social psychologist, he is a co-founder of the Rand Corporation’s Institute of Civil

Justice and has devoted his career to empirical research in the areas of civil litigation and mass

tort, with substantial emphasis on asbestos matters.60 In the 1980s and 1990s, he consulted for

federal judges in asbestos matters in Ohio, Texas, and New York, including with respect to the

reformation of the Manville trust.61 He has done estimation work for many official asbestos

claimants committees, but also for insurance companies, defendants, and trusts, and has testified

about estimation issues roughly 25 times.62 Courts have adopted Dr. Peterson’s estimates.63 The

Court admitted Dr. Peterson as an expert on asbestos litigation, subject to ruling on Garlock’s

Daubert motion.64

22. Dr. Peterson testified regarding his aggregate estimate of pending and future

mesothelioma claims against Garlock and criticized Dr. Bates’ methodology and conclusions.

To generate his own estimate, Dr. Peterson used a standard method similar to that used by Dr.

Rabinovitz and indeed, in other contexts, by Dr. Bates.

65

60 Hr’g Tr. 3847:21-3849:11, Aug. 8, 2013 (Peterson).

To estimate the pending mesothelioma

claims, he counted the number of such claims in the Garrison Database, determined what

61 Id. at 3849:11-3850:2. 62 Id. at 3850:3-11, 3850:24-3851:5. 63 E.g., In re Federal-Mogul Global, Inc., 330 B.R. 133, 164 (D. Del. 2005). 64 Id. at 3851:9-15. See Response and Opposition of the Official Committee of Asbestos Personal Injury Claimants to Debtors’ Motion to Exclude or Strike Committee and FCR Estimation Witness Opinions, filed on Sept. 27, 2013 [Dkt. No. 3153-original filed under seal]. 65 Hr’g Tr. 3881:25-3882:5, Aug. 8, 2013 (Peterson).


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percentage of claims Garlock paid historically (referred to as the payment rate) and determined

the average settlement that Garlock paid.66 He derived the payment rate and average settlement

amount from Garlock’s actual claims experience during a “calibration period” running from

2006 through May 2010 (Garlock filed bankruptcy on June 5, 2010). He then multiplied the

foregoing factors together to arrive at the value of pending claims.67

23. To estimate future claims, Dr. Peterson first forecasted the number of

mesothelioma claims that would be brought against Garlock if it were not protected by

bankruptcy. To do so, Dr. Peterson relied on Dr. Nicholson’s widely-accepted and empirically

corroborated epidemiological forecast of the incidence of mesothelioma in the United States, as

extended through the year 2049.

68 He then forecasted what percentage of these future

mesothelioma victims would bring claims against Garlock, a percentage known as the

“propensity to sue,” thereby calculating the total number of expected claims.69 To that total, he

applied the assumed payment rate and the average payment amount derived from Garlock’s

historical experience in the calibration period.70 Because the data for the calibration period

reveal a steady increase year-by-year in mesothelioma victims’ propensity to sue Garlock, Dr.

Peterson determined that, if Garlock remained in the tort system, this pattern would likely

continue for about four years, after which the propensity to sue would stabilize.71

66 Id. at 3882:7-12; 3882:24-3883:7.

Using these

historically-derived assumptions for the propensity to sue, the payment rate, and the average

67 Id. at 3882:19-21. 68 Id. at 3890:19-3891:5, 3891:19-3893:23. 69 Id. at 3897:11-3898:4. 70 Id. at 3902:3-9. 71 Id. at 3898:5-3899:23.


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payment amount, Dr. Peterson projected year-by-year, in nominal dollars, the amount that

Garlock would pay to extinguish asbestos claims through 2049.72 He adjusted those nominal

dollars for future inflation, using an inflation rate of 2.5 percent, and then discounted the

resulting stream of annual payments to net present value using a discount rate of 3.251 percent

provided by the Committee’s financial consultant, Mr. McGraw.73

24. Dr. Peterson’s resulting aggregate estimate of present and future mesothelioma

claims against Garlock is $1.265 billion.

74

25. Kenneth W. McGraw is an investment banker and Senior Consultant in the

Finance Practice at Charles River Associates. He has previously advised and testified as an

expert in many complex financial disputes and transactions. He provided his opinion as to the

appropriate discount rate to use in the present-value calculation of the forecasted stream of future

indemnity payments to mesothelioma claimants, after adjusting for inflation.

That estimate does not include the additional defense

costs Garlock would incur if it were defending and resolving the claims in the tort system.

75 Mr. McGraw

used a risk-free rate, as consistent with financial principles and legal precedent and as necessary

to ensure that the projected payments are adjusted in the discounting calculation only for the time

value of money and not for any risk of nonpayment or inadequacy of funding.76

72 Id. at 3890:11-13.

Noting that the

financial markets accept U.S. Treasury securities as risk-free, he computed the discount rate

separately for each yearly installment in the forecasted payment stream by reference to the yields

73 Id. at 3902:9-13. 74 Id. at 3903:11-17. 75 Expert Report of Kenneth W. McGraw at 2, dated February 15, 2013 (“McGraw Report”) (ACC-937). See ¶ 2, supra. 76 McGraw Report at 4-5.


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demanded in the marketplace, as of June 4, 2010 (the day before the petition date), on Treasury

securities of maturities corresponding to the timing of the assumed payments.77 Mr. McGraw

agreed that Dr. Peterson’s forecasted inflation rate of 2.5 percent is a reasonable approximation

of future rates of inflation,78 and calculated that the varying discount rates applied on a year-by-

year basis are the mathematical equivalent of a discount rate of 3.251 percent across the entire

payment stream.79 By discounting the inflation-adjusted stream of payments as described, Mr.

McGraw calculated the net present value of the mesothelioma claims under Dr. Peterson’s

forecast as $1.265 billion.80

26. Mr. McGraw disagreed with Dr. Bates’ assumption that the risk-free rate for the

estimation should be measured by the long-term average return on Treasury securities projected

by the Congressional Budget Office in its most recent Long-Term Budget Outlook. By making

that assumption, and combining it with a 2.5 percent annual inflation factor, Dr. Bates arrived at

a built-up yield of 5.58 percent as an invariable discount rate over the entire 50-year span

covered by his estimate.

81 Mr. McGraw criticized that rate as substantially overstating the

appropriate discount, and thereby substantially understating the estimate of claims, as a result of

unrealistically ignoring market data and the term structure of interest rates.82

77 Id. at 6-7.

78 Id. 79 Id. at 8. 80 Id. ¶ 16 and Exh. 8 thereto. 81 Rebuttal to the Report of Charles E. Bates, PhD by Kenneth W. McGraw at 2, dated April 22, 2013 (“McGraw Rebuttal Report”) (ACC-943). See ¶ 2, supra. 82 See id. ¶¶ 1, 3, 9-10.


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Called by Coltec

27. Dr. James Heckman, a Professor of Economics and Nobel Laureate in Economics,

testified on behalf of Coltec and was accepted as an expert regarding economics, econometrics,

economic forecasting, and forecasting based on future behaviors and changing incentives.83 Dr.

Heckman is an academic who studies, among other fields, econometrics, empirical economics,

and law and economics.84 Dr. Heckman criticized the reliability of Dr. Peterson’s and Dr.

Rabinovitz’s estimation approaches, principally due to their use of a “trend line extraction”

methodology and not reporting statistical confidence intervals.85 Dr. Heckman testified that he

“would have some doubts” about Dr. Peterson’s and Dr. Rabinovitz’s estimates.86 Dr. Heckman

conceded, however, that he has never performed an estimate of a real-world company’s asbestos

liabilities; had not conducted any independent analysis of Garlock’s asbestos liability; and could

not say whether Dr. Peterson’s and Dr. Rabinovitz’s estimates are wrong.87 In fact, Dr.

Heckman testified that their estimates could well be too low.88 Dr. Heckman was not asked by

Garlock to prepare an expert report on the estimation approach used by Dr. Bates and offered no

opinion as to how it compares to the approaches used by Dr. Peterson and Dr. Rabinovitz.89

83 Hr’g Tr. 4233:16-22, Aug. 22, 2013 (Heckman).

84 Id. at 4225:9-14, 4226:6-4227:17, 4229:9-19, 4232:3-12, 4264:6-7. 85 Id. at 4225:15-4226:2. 86 Id. at 4260:19-4261:7. 87 Id. at 4256:10-19, 4266:5-15, 4267:5-11, 4269:16-25, 4270:3-10. 88 Id. at 4269:16-25, 4270:11-14. 89 Id. at 4267:15-24.


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(ii) Fact Witnesses and Experts on Asbestos Litigation and Related Bankruptcy Topics

Called by Garlock

28. At several points in the Hearing, Garlock called as a fact witness Richard L.

Magee, a Senior Vice President at EnPro since 2002 and until recently its General Counsel. He

functioned throughout as the senior in-house attorney for Garlock and worked closely with the

president and staff attorneys of Garrison in managing Garlock’s defense and resolution of

asbestos litigation.90 Since Garlock filed bankruptcy, Mr. Magee has spent upwards of 90

percent of his time overseeing its conduct of the case.91 At the Hearing, he testified about

Garlock’s involvement in asbestos litigation and its settlement and verdict history, including the

differing approaches Garlock took over time with respect to resolving cases. Offering his views

on some of Garlock’s 15 “Designated Cases,” he asserted that the plaintiffs and their counsel did

not acknowledge the injured persons’ exposures to the asbestos products of bankrupt insulation

manufacturers, omissions that he asserted were characteristic of claims resolved by Garlock for

high values.92 He also testified about Garlock’s asbestos estimates that were included in EnPro’s

prepetition financial reports, not only the estimates created by Bates White after 2004, but also

the independent ones that management created as targets to incentivize Garrison personnel and

control overall outlays related to asbestos litigation.93

90 Hr’g Tr. 1385:5-1386:14, July 26, 2013 (Magee).

In such an estimate, Mr. Magee himself

91 Id. at 1388:8-13. 92 Hr’g Tr. 2593:12-2594:22, Aug. 1, 2013 (Magee); Hr’g Tr. 3089:13-25, Aug. 5, 2013 (Magee). 93 Hr’g Tr. 3144:18-3145:22, Aug. 5, 2013 (Magee); Hr’g Tr. 3205:10-23, Aug. 6, 2013 (Magee). Mr. Magee confirmed that, in the mid-1990s, in connection with the recapitalization of Garlock and the creation of Garrison, consultants to Garlock and Coltec estimated that Garlock’s pending and future asbestos claims before the recapitalization exceeded its net assets and (Footnote continued on next page.)


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projected a scenario in which Garlock’s liability for asbestos claims through the year 2050

(chiefly for mesothelioma) would exceed $1 billion, a result that EnPro’s financial reports

deemed “plausible” but not “reasonable and probable.” Mr. Magee acknowledged that Dr.

Bates’ prepetition estimates, provided to EnPro, assumed that payments to claimants by asbestos

trusts for reorganized debtors would exert downward pressure on Garlock’s settlement values,

and the frustration he felt when this effect did not come about.94

29. Mr. Magee asserted that Garlock settled claims chiefly to avoid higher costs of

defense.

95 Yet Mr. Magee admitted that plaintiffs in certain of Garlock’s Designated Cases

admitted to insulation exposures in various ways,96

(Footnote continued from previous page.) insurance by $375 million. Hr’g Tr. 3182:8-20, Aug. 6, 2013 (Magee). Coltec put forward the above-referenced estimate and conclusion in litigating its claim to certain tax benefits connected with the creation of Garrison. See Coltec Indus., Inc. v. United States, 454 F.3d 1340 (Fed. Cir. 2006) (reproduced as ACC-175).

and that plaintiffs’ counsel sometimes

succeeded in creating trial risk and “a perception of liability” for Garlock in mesothelioma cases,

94 Hr’g Tr. 3375:23-3376:16, Aug. 6, 2013 (Magee); Hr’g Tr. 2581:18-2582:21, 2586:4-18, Aug. 1, 2013 (Magee). 95 Hr’g Tr. 1391:2-1392:2, 1394:2-5, July 26, 2013 (Magee). 96 See, e.g., Hr’g Tr. 3268:22-3269:9, Aug. 6, 2013 (Magee). The “Designated Cases” are 15 mesothelioma claims about which Garlock obtained extensive discovery from plaintiff law firms in the estimation proceeding. They are a subset of 26 cases that Garlock included on its “RFA 1.A List,” by way of reserving the right to introduce at the Hearing specific evidence of alleged failures by plaintiffs or their lawyers to make full disclosure of known product-exposure evidence in tort suits. That reservation of rights did not apply to the additional 184 cases named on Garlock’s “RFA List 1,” as to which Garlock’s allegations of discovery failures by tort plaintiffs do not rest on case-specific evidence, but rather on inferences it draws from other sources, such as bankruptcy ballots and trust-claim data Garlock gathered in the course of the estimation proceeding. See Stipulation and Order Resolving Motion of the Official Committee of Asbestos Personal Injury Claimants to Compel Debtors to Respond to Certain Discovery Requests, dated Oct. 26, 2012 [Dkt. No. 2579]; Amendment to Stipulation and Order Resolving Motion of the Official Committee of Asbestos Personal Injury Claimants to Determine Insufficiency of the Debtors’ Answers to the Committee’s First Requests for Admission and to Compel Debtors to Respond to Certain Discovery Requests, dated Oct. 30, 2012 [Dkt. No. 2585].


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and that Garlock considered various merits-based factors when settling cases.97 Indeed, he

acknowledged the internal settlement deliberations memorialized in Major Expense Project

Approval forms or “MEAs,” which show that he and other senior management at Garrison and

EnPro were acutely aware of the risks of trying mesothelioma claims, in light of such factors as

the severity of the injured persons’ damages and economic losses, the propensities of jury pools,

the skills of plaintiffs’ trial counsel, the variety of rules and practices in force in particular

jurisdictions, and even the difficulties of trying cases alongside co-defendants with differing

views.98 Indeed, in case evaluations approved in writing by Mr. Magee and by the Chief

Executive Officer of EnPro, Garrison personnel repeatedly evaluated groups of mesothelioma

claims put forward by the Kazan, McClain firm in Oakland, California, as likely to produce

verdicts totaling $1 billion or more if pressed to trial.99

30. Professor Lester Brickman is a professor at Cardozo Law School in New York,

teaching contracts, a seminar on selected problems in professional responsibility and the legal

profession, and land use planning. Although he has never tried a case, nor does he practice law,

he has published scholarship for 22-23 years on asbestos litigation, and has testified before

congressional subcommittees on matters such as the FAIR and FACT Acts and silicosis, and at

two asbestos estimation trials.

100

97 Hr’g Tr. 1394:10-14, July 26, 2013 (Magee).

He was offered by Garlock to provide testimony as an expert in

asbestos litigation, including asbestos bankruptcy cases and asbestos trusts. Professor Brickman

provided testimony supporting Garlock’s interpretation of its settlement history. He gave his

98 ACC-766, 767, 770, 341, 332; Hr’g Tr. 3228:23-3229:3, 3232:6-11, 3234:20-3235:12, 3237:5-3240:9, 3246:24-3251:10, 3329:19-3332:7, 3333:8-3341:24, Aug. 6, 2013 (Magee). 99 Id. at 3232:6-11; ACC-766; ACC-767. 100 Hr’g Tr. 1135:5-1140:16, July 26, 2013 (Brickman).


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views of the behavior of plaintiffs and plaintiffs’ counsel in asbestos litigation, including

contentions that 15 designated claimants concealed or omitted to disclose asbestos exposures,

particularly asbestos insulation exposures. He testified that the claimant materials Garlock’s

counsel provided to him were not complete files, and that he did not review those selected

materials in their entirety.101 He admitted that his knowledge of those cases was limited to

information supplied by Garlock’s lawyers.102 Professor Brickman accepted that the name of the

manufacturer of insulation would not have been important to a plaintiff when he tore it out 35

years earlier, and he acknowledged that a plaintiff is probably telling the truth if he says he can’t

remember.103 He did not say that asbestos plaintiffs wrongfully denied exposure to insulation

products.104 Indeed Professor Brickman admitted, upon questioning about specific designated

claimants, that they had previously testified about their exposures to insulation products.105

31. John Turlik is an attorney at the law firm Segal, McCambridge, Singer and

Mahoney. Mr. Turlik defended Garlock in asbestos litigation from 1989 until its bankruptcy,

and from 2003 until 2010 was the company’s “regional counsel” for the eastern United States.

106

Mr. Turlik testified as an expert regarding the assessment and evaluation of asbestos claims,

assessing trial risk, the impact of evidence on trial risk, and costs incurred in defending asbestos

claims.107

101 See, e.g., id. at 1231:19-1232:25, 1246:25-1247:8.

He testified about the impact of the bankruptcy “wave” on Garlock and his views on

102 Id. at 1145:19-22. 103 Id. at 1234:8-14. 104 Id. at 1238:19-1239:1. 105 Id. at 1229:25-1231:14. 106 See Hr’g Tr. 2219:17-2223:15, July 31, 2013 (Turlik). 107 Id. at 2226:22-2227:4.


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how access to trust claims and ballots would provide evidence of alternative product exposures

and thereby reduced Garlock’s trial risk and settlement values.108 Mr. Turlik also opined on the

changes in tort litigation since Garlock’s filing for bankruptcy and his views on how those

changes would impact Garlock’s trial risk and settlement values.109

32. Mr. Turlik testified that he settled the vast majority of cases and that often the

settlements were completed before cases were worked up, and sometimes before a complaint was

filed.

110 He stated that he considered a number of merits-based factors when making

recommendations concerning settlements.111 He acknowledged that verdicts rendered against

other defendants in cases that Garlock settled before trial sometimes included allocations of fault

to Garlock in percentages that underscored the benefit Garlock reaped by settling.112 He also

admitted Garlock never purported to pay any unaffiliated entities’ share of liability, and there

was nothing in the settlement agreements that required plaintiffs to cease developing evidence

against other entities.113 Mr. Turlik recognized that the law in many jurisdictions leaves

plaintiffs free to assert trust claims after trial of their tort suits against non-bankrupt defendants

and acknowledged that a defendant bears the burden of proof if it seeks to shift responsibility to

other entities.114

108 Id. at 2251:2-2263:2; Hr’g Tr. 2321:3-2322:12, Aug. 1, 2013 (Turlik).

Mr. Turlik also stressed that, to apportion liability to another entity, a defendant

109 Hr’g Tr. 2270:12-2278:5, Jul. 31, 2013 (Turlik); Hr’g Tr. 2321:15-2322:21, Aug. 1, 2013 (Turlik). 110 Hr’g Tr. 2356:20-2357:10, Aug. 1, 2013 (Turlik). 111 Id. at 2529:13-2533:2. 112 Id. at 2373:14-2376:24. See ACC-747. 113 Id. at 2368:12-2369:20. 114 Id. at 2334:11-20, 2378:10-2380:23, 2390:7-17.


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must show that the other entity’s product emitted asbestos fibers in the plaintiff’s “breathing

zone.”115

33. David Glaspy is an attorney at the law firm Glaspy & Glaspy in Pleasanton,

California. Garlock called him as a rebuttal witness. From 1984 to 2010, Mr. Glaspy was the

national and then regional counsel for Garlock.

116 Mr. Glaspy testified as an expert regarding

the assessment and evaluation of asbestos claims including trial risk, the impact of evidence on

trial risk, costs and settlement values, and evaluating the extent to which laws and procedures

would impact the defense of asbestos claims.117 According to him, Garlock generally hired

experts and began preparing for trial as late as possible.118 Mr. Glaspy opined about the impact

of exposure evidence in asbestos cases and his views on how that information affects trial risk,

settlement values and costs.119 He confirmed that California law does not require the filing of

trust claims before litigating tort suits to conclusion, and that a defendant in that state must meet

the same causation standard for proving a plaintiff’s exposure to a third party that the plaintiff

must meet against the defendant.120 Mr. Glaspy testified about recent changes in California law

and his views on how those changes would decrease trial risk for asbestos defendants.121

115 See id. at 2380:11-23, 2390:7-17.

Based

on information published by a defense firm in Northern California, Mr. Glaspy also asserted that

the numbers of mesothelioma claims filed in San Francisco and Oakland have fallen in recent

116 See Hr’g Tr. 4521:10-4523:1, Aug. 12, 2013 (Glaspy). 117 Id. at 4526:19-24. 118 Hr’g Tr. 4639:22-4640:5, Aug. 22, 2013 (Glaspy). 119 Hr’g Tr. 4528:4-16, Aug. 12, 2013 (Glaspy). 120 Hr’g Tr. 4590:1-10, 4656:2-9, Aug. 22, 2012 (Glaspy). 121 See id. at 4584:15-4587:14.


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years, but he maintains an active asbestos defense practice for many clients and acknowledged

that an influx of Texas and New York plaintiff law firms into Los Angeles has resulted in an

increase in mesothelioma filings in Los Angeles.122 Mr. Glaspy disagreed with aspects of

testimony given by David McClain about the Kazan McClain firm’s trial and settlement history

with Garlock (discussed below),123 but Mr. Glaspy was confronted with certain documents that

controverted his own recollections on that subject.124 Mr. Glaspy also confirmed that he engaged

in a merits-based evaluation, including trial risk, when settling cases.125


34. Paul J. Hanly, Jr. is an attorney and the co-founder of Hanly, Conroy, Bierstein,

Sheridan, Fisher, Hayes LLP. For twenty years beginning in 1981, Mr. Hanly was national

asbestos trial coordinating and settlement counsel for Turner & Newall and its subsidiaries,

including Flexitallic, a gasket manufacturer, and ultimately for Federal Mogul when it acquired

the Turner & Newall group.126 Mr. Hanly was qualified as an expert on mass tort defense with a

specific focus on asbestos tort defense strategies in the 1980s, 1990s, and early 2000s.127 He

testified about resolving and settling asbestos cases in the tort system, including approximately

300,000 asbestos personal injury cases.128

122 Id. at 4587:15-4588:21, 4649:16-4651:2.

He opined that many defendants began as peripheral

participants in asbestos litigation, effectively “free-riding” on the defense efforts and settlement

123 Hr’g Tr. 4548:17-4559:13, Aug. 12, 2013 (Glaspy). 124 Hr’g Tr. 4593:1-4594:22, 4596:17-4613:11, Aug. 22, 2013 (Glaspy). 125 Id. at 4662:23-4664:3. 126 Hr’g Tr. 3405:9-3406:16, 3409:10-3410:7, Aug. 6, 2013 (Hanly). 127 Id. at 3410:22-25, 3419:13-15. 128 Id. at 3408:20-3409:7.


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payments of lead defendants, such as Johns-Manville, the principal defendant in the entire

litigation until its 1982 bankruptcy.129 Mr. Hanly testified that when the lead defendants went

into bankruptcy, the former peripheral defendants were brought to center stage in the tort suits

and could not return to the periphery.130 Mr. Hanly opined that in the 1990s, plaintiffs were not

focused on gasket products, but that as insulation companies went bankrupt the plaintiffs’ bar

began to focus on the gasket companies and attacking their defenses.131 He also testified that

juries were focused on doing justice in a manner that would touch the parties in the courtroom,

so that “empty chair” defenses were not successful as a long-term strategy.132 Mr. Hanly also

explained that trying significant numbers of cases was not a viable strategy, and that defendants

could not afford to take the risk of trial except very infrequently.133

35. David McClain is the senior partner at the firm of Kazan, McClain, Satterley,

Lyons, Greenwood & Oberman (“Kazan, McClain”) in Oakland, California. Mr. McClain has

been continuously engaged in asbestos personal injury tort litigation since 1981, and his firm

concentrated its practice on mesothelioma cases for 25 years or more.

134 He testified about

trying and settling mesothelioma cases in the tort system, including his experience in the early

1990s when Owens Corning went to “war” with his firm in an unsuccessful effort to force down

the settlements paid to its clients.135

129 Id. at 3426:13-3427:4, 3431:25-3432:4.

130 Id. at 3431:19-21, 3432:15-22, 3434:2-9. 131 Hr’g Tr. at 3793:21-3796:3, Aug. 8, 2013 (Hanly). 132 Hr’g Tr. at 3435:19-3437:24, Aug. 6, 2013 (Hanly). 133 Hr’g Tr. at 3796:4-3797:21, Aug. 8, 2013 (Hanly). 134 Hr’g Tr. 3450:21-3452:7, Aug. 7, 2013 (McClain). 135 Id. at 3454:13-3457:10.


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36. Mr. McClain noted the several causes of action available to mesothelioma victims

under California law (including strict products liability based on “consumer expectations,” strict

liability for failure to warn, negligence, and fraud),136 as well as the defenses raised by virtually

all defendants in today’s tort system, including “encapsulation,” “low dose,” and “chrysotile”

defenses.137 He also explained California’s liability apportionment rules, under which a

defendant bears the burdens of (1) making a prima facie case against any entity it proposes to

add to the verdict sheet,138 (2) proving each element of a recognized cause of action to establish

such an entity’s responsibility to the plaintiff,139 and (3) providing the jury with a rational basis

to apportion the overall responsibility for the plaintiffs’ injuries, failing which the defendant

itself will bear the full brunt of an adverse verdict.140

37. Based on his own experience, Mr. McClain described a pattern in tort litigation in

which it is common for a defendant to win every trial in the early stages, for plaintiffs’ lawyers

gradually to learn how to overcome the defenses and win the cases, and for settlement then to

become the predominant mode of resolving claims against that defendant.

141 Mr. McClain

acknowledged that his firm has never obtained a verdict against Garlock, but affirmed that

Garlock settled Kazan, McClain’s strong cases to prevent them from being tried.142

136 Id. at 3458:22-3461:18.

He testified

that the firm’s cases in which Garlock was a defendant at trial in the 1980s were ones in which

137 Id. at 3464:7-3465:2. 138 Id. at 3468:18-3469:4. 139 Id. at 3468:1-13, 3468:18-3469:4. 140 Id. at 3469:5-3470:6. 141 Id. at 3494:5-7, 3453:10-3454:12, 3456:15-3457:10, 3486:15-20. 142 Id. at 3508:9-15, 3509:1-6.


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the principal defendant was Owens Corning (in the midst of its “war”) and the plaintiff did not

have extensive gasket exposures, but in which Garlock’s participation as a defendant was

tactically beneficial for the plaintiff (because, for example, of Garlock’s own attack on Owens

Corning). 143

38. Mr. McClain testified that the composition of his firm’s cases changed somewhat

from the 1990s to the 2000s, with insulator and shipyard workers becoming less numerous

among the plaintiffs and Navy veterans and workers in various land-based occupations becoming

more so.

144 He stated that these changes affected the nature of the product exposure evidence

that the injured persons themselves could provide, because, in comparison to workers in other

occupations, insulators tended to have superior knowledge of the brands of insulation products

they worked with and shipyard workers characteristically suffered extremely heavy asbestos

exposures working in the confines of dry-docked ships undergoing refurbishment. By contrast,

Navy veterans and land-based workers usually had contact with insulation only as bystanders,

with indirect contacts much less apt to press upon them the names of insulation products, but

frequently worked with gaskets and with pumps and valves using gasket components. 145 Mr.

McClain testified that his clients respond honestly and fully to discovery but often do not know

or remember the asbestos products to which they were exposed.146

39. Mr. McClain stated that Garlock’s rising prominence in asbestos litigation in his

cases over the course of the 2000s resulted not only from the exiting of defendants who declared

bankruptcy, but also from the changing exposure histories of the plaintiffs and developments in

143 Id. at 3492:5-3493:22. 144 Id. at 3471:19-3474:25. 145 Id. at 3473:1-3476:8. 146 Id. at 3488:3-13, 3501:5-11.


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California law. He testified that Navy personnel, such as pipefitters, machinists and

boilermakers, could easily identify Garlock gaskets, because Garlock’s name was stamped on

every gasket, and they had personally handled and cut the gaskets and breathed in dust from

scraping the gaskets.147 While the Navy personnel had been exposed to insulation products

being used near them, they generally could not identify those insulation products.148 Moreover,

he testified, Garlock continued to make gaskets until 2000-2001, while insulation defendants

stopped making asbestos insulation in 1972.149

40. Mr. McClain testified as well that California’s causation standard (which is

satisfied by evidence that a given product increased, to a nontrivial extent, the risk of the

plaintiff’s incurring mesothelioma) is favorable to claimants in gasket cases,

150 while decisions

narrowing the circumstances under which an equipment manufacturer may be held responsible

for using of Garlock’s asbestos gaskets as components has also increased Garlock’s risks by

depriving plaintiffs of significant alternative sources of recovery and making it harder for

Garlock to lay off liability on the equipment makers.151

41. Mr. McClain described his firm’s extensive settlement history with Garlock,

including his negotiations with Garlock’s counsel David Glaspy in which they periodically

settled claims in groups.

152

147 Id. at 3477:9-3478:2.

He testified that the trend over the course of the 2000s was “[a]

dramatic increase” in settlement value in which Garlock ended up paying many multiples of

148 Id. at 3478:3-9. 149 Id. at 3478:10-23. 150 Id. at 3479:3-8. 151 Id. at 3479:9-3482:1. 152 Id. at 3494:12-3494:15, 3495:5-3498:7.


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what it had paid in the 1980s.153 In Mr. McClain’s experience, the trust recoveries available to

his clients generally are insignificant in comparison to the damages mesothelioma claimants can

obtain from solvent defendants.154 He also testified that the risk of losing even a strong case

induces a dying mesothelioma victim to settle for much less than the amount he would recover if

he pressed the case to a successful verdict.155

42. Joseph Rice is a founding partner of the Motley Rice law firm (“Motley Rice”),

and Co-Chair of the Committee.

156 Since 1981 he has represented asbestos victims in all aspects

of litigation; he has also served on many official committees of asbestos claimants in bankruptcy

cases, frequently in the role of Chair or member of the committee’s negotiating subcommittee.157

Mr. Rice testified about trying and settling asbestos cases in the tort system, and the factors that

influenced when claims were filed and how they were prepared for trial, noting that, beyond

interviewing the client as to his own knowledge, his firm generally does not devote intensive

effort to investigating product exposures in a case until a trial date is assigned.158 For this

reason, he testified, a claimant’s response to Garlock’s questionnaires will reflect only the state

of his lawyer’s file as it existed when the response was given, as distinct from a fully prepared

and trial-ready claim.159

153 Id. at 3498:13-3499:2.

154 See, e.g., id. at 3499:3-16. 155 Id. at 3496:16-3497:19. 156 Hr’g Tr. 3536:11-13, Aug. 7, 2013 (Rice). 157 Id. at 3538:1-3, 3541:16-24, 3575:5-23, 3580:24-3582:11, 3586:24-3587:19. 158 Id. at 3588:19-3591:17. 159 Id. at 3595:10-18, 3596:10-19.


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43. Taking exception to the idea that the bankruptcy filings of the early 2000s placed

Garlock in a uniquely unfavorable position, Mr. Rice recounted the background to those filings

in a series of watershed events in the long-running history of asbestos litigation. These included

the bankruptcy of Johns-Manville in 1982;160 the impact on formerly less prominent defendants

as plaintiffs’ lawyers undertook discovery and built cases against them;161 the formation in 1985

of the Asbestos Claims Facility (“ACF”) as a consortium of manufacturers and their insurers to

act in concert in defending and resolving cases;162 the breaking up of the ACF in the late 1980s,

followed by the regrouping of some of its smaller manufacturer-members for similar purposes in

the Center for Claims Resolution (“CCR”);163 the bankruptcies in the late 1980s and the 1990s

of defendants that had grown prominent in the litigation, including Celotex, Raybestos-

Manhattan, and Eagle Picher;164 innovative judicial efforts undertaken in the 1990s to deal with

the numerosity of asbestos claims through mass consolidations and test-case trials, as in the

Cimino case in Texas and the Abate case in Baltimore;165 in the mid-1990s, the attempted

resolution of all present and future claims against the CCR through a novel “settlement class

action” known as Georgine and another settlement class action involving plaintiff and defendant

classes with respect to Fibreboard and its insurers, both of which were ultimately disapproved by

the United States Supreme Court,166

160 Id. at 3539:9-3540:4.

but not before many millions of dollars were spent on notice

161 Id. at 3540:5-3541:15. 162 Id. at 3558:23-3560:8. 163 Id. at 3560:9-3561:13. 164 Id. at 3549:20-3550:9. 165 Id. at 3542:22-3546:8. 166 Id. at 3547:16-3549:19.


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campaigns that had the effect of publicizing the litigation and generating even larger numbers of

claims,167

44. Mr. Rice thus explained that bankruptcies have been a constant feature throughout

asbestos litigation, and that reorganizations have not reduced the value of claims against solvent

defendants.

as the 1990s drew to a close and bankruptcy loomed as the only remaining path for

mass tort defendants to achieve finality.

168 He also recounted how his firm goes about determining which of its clients is

entitled to vote under the solicitation procedures used in asbestos bankruptcies, noting that plan

documents in those cases typically do not limit the class of voting asbestos claimants to those

who have evidence of exposure to the debtors’ products, but rather encompass all claimants who

may turn out to have a claim against an eventual trust based on any theory of the debtor’s legal

responsibility for their asbestos injuries.169 Mr. Rice’s firm therefore usually casts ballots for all

clients whom it cannot rule out as possessing such a potential claim.170 Mr. Rice noted that

trusts emerging from asbestos bankruptcies usually succeed to, and make available to plaintiffs’

counsel, the predecessor-defendants’ documents pertaining to asbestos litigation.171 It is also

common, he testified, for a trust to publish lists of sites where the presence of its predecessor’s

asbestos products has been established,172 and to accept without specific exposure evidence the

claims of persons who worked there.173

167 Id. at 3554:20-3556:24.

Mr. Rice stated that the publication of such a site list has

168 Id. at 3550:10-3552:13. 169 Id. at 3599:24-3610:10. 170 Id. at 3603:12-3605-12. 171 Id. at 3593:1-3594:3. 172 Id. at 3593:14-3594:3. 173 Id. at 3604:19-3605:4.


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usually increased by 25 percent the number of clients for whom his firm can file claims against

the trust.174

45. Based on his extensive experience in negotiating successful plans of

reorganization with asbestos debtors,

175 Mr. Rice affirmed that the most important factor in

achieving a consensual resolution is for the constituency of asbestos creditors to be persuaded

that a proposed plan of reorganization treats them fairly in light of applicable non-bankruptcy

law, constitutional principles, the realities of the debtors’ financial condition and its

responsibility to competing creditor constituencies.176 He characterized Garlock’s proposed plan

as one that attempts to revise the rules and procedures under which asbestos claims against

Garlock would be handled, for Garlock’s advantage and in ways that it has been unable to

achieve through litigation or legislation, and he predicted accordingly that the plan will not

garner the support of claimants.177

46. James Patton is a bankruptcy attorney and Chairman of Young, Conaway, Stargatt

& Taylor LLP.

178 He has been involved in asbestos bankruptcies and the trusts that result from

those reorganizations since 1996, generally serving as counsel to the future claimants’

representatives.179 He was certified by this Court to testify as an expert on the process of

asbestos bankruptcy reorganization and the creation, organization, and operation of the trusts.180

174 Id. at 3604:11-17.

175 Id. at 3575:5-3582:11. 176 Id. at 3582:12-3583:6. 177 Id. at 3582:12-3583:6, 3610:11-3622:16. 178 Hr’g Tr. 3672:12-21, Aug. 7, 2013 (Patton). 179 Id. at 3674:1-3678:20. 180 Id. at 3678:21-25, 3681:7-9.


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He testified that neither voting on a plan nor filing a claim against a trust constitutes a

representation that the claimant has certainty regarding his or her knowledge of exposure to a

debtor’s products or has gathered all of the evidence necessary to establish a claim against the

debtor in the tort system.181 He described the history and import of provisions that limit ballots’

use to voting purposes and make clear that ballots do not constitute claims.182 He explained that

voting procedures in Section 524(g) reorganizations are meant to sweep in all potential claims

that are to be addressed by a trust under the plan of reorganization, so that the relief afforded by a

confirmed plan, including both a discharge and the injunctive channeling of asbestos claims to a

trust, will afford effective and comprehensive relief to the debtor.183 Likewise, a Section 524(g)

trust is intended to address all asbestos-related claims against the debtor, including claims that

may be asserted on grounds other than exposure to the debtor’s own asbestos products.184 On

these and other grounds, Mr. Patton also debunked the notion that Rule 2019 statements

submitted by plaintiffs’ counsel to identify multiple clients in asbestos bankruptcies amount, in

context, to assertions that those clients possess evidence that they were exposed to the debtor’s

asbestos products.185

47. Mr. Patton noted that claimants sometimes submit claims to trusts without

supporting evidence and that such deficient claims are not paid.

186

181 Id. at 3682:15-3683:10, 3691:21-3694:7; 3709:5-3710:20. Hr’g Tr. at 3788:19-3789:17, Aug. 8, 2013 (Patton).

He also testified that a

claimant does not necessarily have to assert that he or she possesses proof of exposure when

182 Hr’g Tr. 3690:12-3691:2, Aug. 7, 2013 (Patton). 183 Id. at 3691:21-3694:7. 184 Hr’g Tr. 3745:12-3746:9, Aug. 8, 2103 (Patton). 185 Id. at 3765:22-3766:19; 3788:5-18. 186 Hr’g Tr. 3714:8-3717:14, Aug. 7, 2013 (Patton).


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filing a trust claim because claimants can file claims without exposure evidence and then defer

them in hopes of later developing such evidence and completing the claim.187 He testified as

well that it is common for a trust to presume that persons who worked at certain sites in certain

trades and time periods were exposed to asbestos products of the trust’s predecessor, and that,

where such a presumption applies, mesothelioma victims may submit trust claims unsupported

by independent exposure evidence or any representation that the claimant possesses any such

evidence.188

(iii) Experts on Scientific and Medical Topics

Called by Garlock

48. Dr. David H. Garabrant is board-certified in internal medicine, preventive

medicine, and occupational medicine. He was recognized by the Court as an expert in the fields

of occupational medicine and epidemiology.189 Although he has authored 185 articles in the

peer reviewed literature, only four of them mention asbestos.190 He has never published any

papers involving the health consequences from the use of industrial gaskets.191 Dr. Garabrant

conceded that he is not an expert on translocation of asbestos fibers from the lung to the pleura

nor is he an expert in lung fiber burden analysis.192

187 Id. at 3709:18-3710:18.

Moreover, Dr. Garabrant conceded that in

formulating his opinions in this case, he did not incorporate the results of any in vitro or animal

188 Id. at 3709:18-3711:3. 189 Hr’g Tr. 236:3-6, 241:20-24, July 22, 2013 (Garabrant). 190 Id. at 314:13-316:5. 191 Id. at Tr. 317:1-3. 192 Id. at Tr. 364:8-15.


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experiments.193 In asbestos cases, Dr. Garabrant has testified at the request of car companies,

brake suppliers, and truck and heavy equipment manufacturers and has opined that his evaluation

of epidemiology demonstrates that there is no association between brake work and the

development of mesothelioma.194 Dr. Garabrant acknowledges, however, that approximately

twenty studies of plumbers and pipefitters, occupations where workers use gaskets, demonstrated

a five-fold risk of developing mesothelioma.195

49. Dr. David Weill is board-certified in pulmonary and critical care medicine.

196 He

is currently a professor of medicine in the division of pulmonary critical care medicine at

Stanford University.197 The Court accepted Dr. Weill as an expert in asbestos disease and

pulmonary medicine.198 Dr. Weill conceded that he was not an expert in occupational medicine

and has never written an article on mesothelioma.199 Dr. Weill holds the opinion that chrysotile

asbestos, the type of asbestos that comprised 95 percent of the asbestos used in the United States,

is totally innocuous and incapable of causing pleural plaques, asbestosis, lung cancer, or

mesothelioma.200 In his opinion, the only workers exposed to chrysotile asbestos that he believes

are at risk of contracting mesothelioma are chrysotile miners.201

193 Id. at Tr. 327:20-328:25.

Dr. Weill conceded that his

position is contrary to the conclusions reached by the Canadian Medical Association, the

194 Id. at Tr. 319:6-321:5. 195 Id. at 293:22-294-9. 196 Hr’g Tr. 960:20-24, July 25, 2013 (Weill). 197 Id. at 961:5-12. 198 Id. at 964:23-965:1. 199 Id. at 1017:1-9. 200 Id. at 1019:21-1020:6. 201 Id. at 1022:2-6.


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American Public Health Association, the American Cancer Society, the World Health

Organization, the National Toxicology Program, the United States Public Health Service, and the

World Trade Organization.202

50. Dr. Thomas Sporn is an attending pathologist at Duke University Medical Center

who is board certified in anatomic pathology and forensic pathology.

203 Dr. Sporn, however, is

not an epidemiologist, nor has he published any analytical epidemiology studies of asbestos and

disease.204 Dr. Sporn was recognized by this Court as an expert in pathology, asbestos disease

and asbestos fiber type mineralogy.205 Dr. Sporn testified about the mineralogical differences

between asbestos fiber types, fiber burden analysis pertaining to human lung tissue samples, and

whether exposure to chrysotile asbestos found in finished products, including packing and

gaskets, can contribute to cause mesothelioma in humans.206 Although Dr. Sporn opined that

chrysotile asbestos found in packing and gaskets does not contribute to cause asbestos-related

disease in humans,207 on cross-examination Dr. Sporn admitted that he has previously testified to

just the opposite—that is, that chrysotile asbestos fibers can and do cause mesothelioma in

humans.208

202 Id. at 1022:8-1023:3, 1024:13-1025:15.

Indeed, Dr. Sporn acknowledged that scientific and research agencies throughout

this country, including but not limited to, the National Cancer Institute, the World Health

Organization, the International Agency for Research on Cancer, and the United States Surgeon

203 Hr’g Tr. 405:1-9, 406:1-3, July 23, 2013 (Sporn). 204 Id. at 443:13-21. 205 Id. at 413:6-10. 206 Id. at 413:11- 414:13. 207 Id. at 445:4-19. 208 Id. at 447:12-448:2, 449:11-18.


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General have all agreed that chrysotile asbestos causes disease in human beings.209 Dr. Sporn

also testified about the limitations of fiber burden analysis in detecting chrysotile fibers in lung

tissue samples from humans.210

51. Captain Charles David Wasson is a naval consultant with thirty years of naval

experience.

211 Captain Wasson was recognized by this Court as an expert on the current and

historical uses of asbestos-containing packing, gaskets, and insulation aboard naval ships.212 He

offered testimony regarding the various naval ratings that worked with and around packing and

gaskets, identified the types of insulation material that was encountered and removed to gain

access to packing and gaskets, and identified the types of replacement packing and gasket

materials used by the U.S. Navy. Although he opined that working with packing and gasket

materials is not a dust-generating process, on cross-examination, Captain Wasson admitted that

he was not qualified to opine as to the visible asbestos fibers released from gasket or packing

work nor was he qualified to discuss the health consequences associated with asbestos exposure

from such work.213 He also acknowledged that he could not offer any testimony as to the various

trades who worked with and around asbestos-containing gaskets, packing or insulation in

connection with any land-based industrial facilities in which Garlock sold its asbestos-containing

sheet gaskets.214

209 Id. at 449:11-450:8.

210 Id. at 454:21-458:1. 211 Hr’g Tr. 150:2-9, July 22, 2013 (Wasson). 212 Id. at 166:24-169:1. 213 Id. at 168:4-20, 228:24-229:19. 214 Id. at 215:19-216:18, 219:4-10.


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52. Larry R. Liukonen is a Certified Industrial Hygienist who currently works for

Technical Safety and Health Consulting, Incorporated, a company that he owns with his wife.215

The Court accepted Mr. Liukonen as an expert in industrial hygiene.216 Mr. Liukonen’s

testimony centered primarily on a gasket study that he performed for the United States Navy at

Puget Sound Naval Shipyard in 1978.217 Based on that study, he testified that end users did not

have exposure to asbestos from working with gaskets.218 He further testified that the only

housekeeping measures recommended for the fabrication and removal of gaskets by end users

was to put the waste in a plastic bag.219 On cross-examination, however, Mr. Liukonen admitted

that the term “housekeeping” as defined in his study included the use of high efficiency vacuum

cleaners or porto vacs to clean areas in addition to placing the waste material in sealed

impermeable polyurethane bags.220 He also conceded that his study did not test the level of dust

generated when an individual would fabricate a gasket with a hammer and shears, as would often

happen in the Navy.221 He further agreed that he did not conduct a bulk analysis of any gasket

material removed in the study and, therefore, did not know whether the material being removed

contained asbestos or, if it did, how much asbestos it contained.222

215 Hr’g Tr. 562:20-563:7, July 24, 2013 (Liukonen).

Finally, he acknowledged

that his study did not disclose the location of where the operation took place, i.e., in a shop or on

216 Id. at 509:3-6. 217 Id. at 510:2-511:3. 218 Id. at 519:4-9. 219 Id. at 518:5-23. 220 Hr’g Tr. 569:15-570:8, July 23, 2013 (Liukonen). 221 Id. at 576:17-577:6. 222 Id. at 581:24-582:16.


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ship, nor did it indicate the types of pipes involved in the gasket removal process.223 With regard

to work practices, Mr. Liukonen wrote in his study that, “wire brushing by its mechanical action

would produce higher dust concentrations than hand scraping.”224

53. Fredrick William Boelter is an environmental engineer by training.

This statement acknowledges

that the wire brushing of flange surfaces during the removal of asbestos gaskets generates

measurable concentrations of dust.

225 He is also a

Certified Industrial Hygienist, a licensed AHERA inspector and a registered Professional

Engineer.226 The Court accepted Mr. Boelter as an expert in industrial hygiene.227 Mr. Boelter

testified about the results of a study he conducted on insulation exposure and compared them to

the levels of exposure he reported in his published paper on gaskets.228 According to his results,

a pipefitter and his helper were exposed to an eight-hour time-weighted average of 86 fibers per

cubic centimeter from insulation as compared to a non-quantifiable value that was less than

0.007 fibers per cubic centimeter from gasket material.229 In discussing gasket removal, Mr.

Boelter conceded that it was common to see someone using a wire brush to polish the flange

surface once the gasket had been scraped to remove residue or to clean the flange surface.230

223 Id. at 591:21-592:7.

When reviewing a videotape taken of his gasket removal test, Mr. Boelter conceded that some of

the gaskets he tested were removed intact with little gasket residue remaining on the mating

224 Id. at 588:13-16. 225 Hr’g Tr. 625:5-9, July 24, 2013 (Boelter). 226 Id. at 626:9-24. 227 Id. at 682:25-683:3. 228 Id. at 673:19-674:17. 229 Id. at 674:18-25. 230 Id. at 693:1-5.


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surface.231 Although published criticism of Mr. Boelter’s tests indicated that close to 50 percent

of all of the fittings he studied had gaskets that were removed intact, Mr. Boelter did not

remember the statistics.232 In prior testimony, however, he had represented that most of the

gaskets came off intact—where one could hold it up and it still looked like a gasket.233 Mr.

Boelter also conceded that he included in his study test results of the gaskets that did not contain

any asbestos.234 Again, however, he was unable to recall exactly how many of the flanges he

studied contained gaskets free of asbestos.235

54. John L. Henshaw is a Certified Industrial Hygienist who currently serves at the

vice president of the Academy of Industrial Hygiene and whose past employment includes vice

president of the Industrial Hygiene Association and administrator for the Occupational Safety

and Health Administration.

236 Mr. Henshaw was recognized by this Court as an expert in

industrial hygiene and exposure assessment.237 Mr. Henshaw testified about potential asbestos

exposures from gaskets and packing compared to potential asbestos exposures from other

sources, including asbestos-containing insulation.238

231 Id. at 742:12-744:14.

In his opinion, individuals employed in

occupations that performed work on asbestos-packing and gaskets were more likely to

experience significant asbestos exposure from working with and around asbestos insulation, not

232 Id. at 746:17-747:2. 233 Id. at 749:10-19. 234 Id. at 748:7-16. 235 Id. at 748:17-24. 236 Hr’g Tr. 808:2-19, 810:6-10, July 24, 2013 (Henshaw). 237 Id. at 819:7-11. 238 Id. at 808:20-809:4.


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from the gaskets and packing.239 Mr. Henshaw agreed that the National Academy of Sciences

has concluded that chrysotile asbestos causes mesothelioma and that exposure levels as low as

.0004 f/cc can cause mesothelioma and he acknowledged that the peer review process of the

National Academy of Sciences was “one of the highest levels of intellectual scrutiny something

can survive.”240 Indeed, Mr. Henshaw acknowledged that when the encapsulated asbestos in

Garlock gaskets is disturbed by shearing, cutting, punching, tearing, sanding, scraping, brushing,

abrading or grinding, asbestos fibers will be emitted into the air, where they can be inhaled and

cause injury.241 Mr. Henshaw also testified that he reviewed hundreds of deposition transcripts

of current plaintiffs against Garlock and that plaintiffs frequently acknowledge exposure to other

sources of asbestos.242

55. Dr. Elizabeth Anderson has a Ph.D. in organic chemistry and has previously

worked for the Environmental Protection Agency, where she developed various risk assessment

guidelines.

243 Dr. Anderson was recognized by the Court as an expert in the fields of toxicology,

risk analysis and the application of risk analysis to public health issues.244 Dr. Anderson’s

testimony in this case focused on her criticism of the Committee’s experts for relying on public

health agency statements as part of the basis for the Committee’s expert opinions that exposure

to chrysotile asbestos can cause disease.245

239 Hr’g Tr. 837:5-17, July 25, 2013 (Henshaw).

On cross-examination, Dr. Anderson acknowledged

240 Id. at 938:1-39:22. 241 Id. at 894:1-895:8. 242 Hr’g Tr. 898:10-15, 901:16-19, 910:22-912:4, July 25, 2013 (Henshaw). 243 Hr’g Tr. 4375:8-4376:11, Aug. 12, 2013 (Anderson). 244 Id. at 4374:2-5, 4379:5-11. 245 Id. at 4374:11-4375:6, 4384:7-15.


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that she is neither a medical doctor nor an epidemiologist. She conceded that she has never

designed or published an epidemiological study pertaining to asbestos or asbestos-exposed

workers in any peer-reviewed literature and she agreed that she is not qualified to take a clinical

history of a patient for the purpose of assessing medical disease or causation.246 She admitted

that the International Agency for Research on Cancer, in reaching its conclusion that chrysotile

asbestos causes mesothelioma in humans, relied on a comprehensive review of over 400

independent scientific and medical references, including epidemiology studies, animal studies

and exposure studies.247 Similarly, she agreed that the National Academy of Sciences, in

concluding that chrysotile asbestos cause mesothelioma in humans at exposure levels as low as

.0004 fibers per cubic centimeter, relied on human epidemiology studies.248 Finally, she

conceded that the World Health Organization’s 1998 chrysotile monograph included twenty-nine

pages of medical and scientific article citations which formed the basis of its conclusion that

chrysotile asbestos poses increased health risks for all asbestos-related diseases and no exposure

threshold has been identified for carcinogenic risks associated with chrysotile.249

56. Dr. Lambertus Hesselink has a Ph.D. in applied physics and applied mechanics.

250

He was admitted by the Court as an expert in mechanical engineering, applied physics, light

scattering and Tyndall lighting.251

246 Id. at 4412:11-21, 4413:1-9.

Dr. Hesselink’s testimony focused on his opinion that the

particles visible during the Tyndall lighting in the MAS experiments fabricating and removing

247 Id. at 4417:3-4419:15. 248 Id. at 4428:10-23. 249 Id. at 4420:6-4424:4. 250 Hr’g Tr. 4436:1-15, Aug. 12, 2013 (Hesselink). 251 Id. at 4439:16-20.


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Garlock gaskets were not light scattering off of single respirable asbestos fibers with diameters

ranging from 0.01 microns to 3 microns.252 On cross-examination, Dr. Hesselink conceded that

Tyndall lighting has been used for decades as a method of making fine airborne particles visible

to detect potential hazardous exposures.253 In fact, he acknowledged that the Environmental

Protection Agency had Standard Operating Procedures for conducting evaluations of dust using

Tyndall lighting.254 He further agreed that the Health and Safety Laboratory in England, the

equivalent of the Occupational Safety and Health Administration in the United States, also

sanctioned the use of Tyndall lighting to detect invisible dust hazards.255 In addition, he testified

that his experiment and criticisms of the use and interpretation of the effects of Tyndall lighting

have not been subjected to peer-review.256


57. Dr. Laura Stewart Welch is a board-certified internist and occupational medicine

physician who has diagnosed and/or treated at least a thousand patients with asbestos-related

disease, and has conducted an extensive longitudinal epidemiological study of sheet metal

workers and asbestos-related lung disease.257

252 Id. at 4439:22-4440:7, 4457:21-24.

Dr. Welch has published approximately 50 papers

in the peer-reviewed medical and scientific literature, more than a dozen of which involved

asbestos-related disease, and has also peer-reviewed articles submitted for publication in

253 Id. at 4474:14-4476:18, 4481:14-22. 254 Id. at 4481:14-4482:6; ACC-3692. 255 Hr’g Tr. 4476:6-4477:20, Aug. 12, 2013 (Hesselink); ACC-3691. 256 Hr’g Tr. 4473:18-22, Aug. 12, 20313 (Hesselink). 257 Hr’g Tr. 2078:15-21, 2083:14-2084:25, 2099:4-22, July 31, 2013 (Welch); ACC-3001.


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industrial and occupational medicine journals around the world.258 Dr. Welch has been

recognized by state and federal courts, including asbestos-related bankruptcy proceedings, as an

expert in asbestos-related epidemiology and causation and has testified before Congress twice on

these topics.259 One of Dr. Welch’s epidemiology studies relating to mesothelioma causation

was cited by the International Agency for Research on Cancer in its 2012 Monograph on

asbestos.260 This Court recognized Dr. Welch as an expert in internal medicine, occupational

medicine, the epidemiology of asbestos-related disease, and the causation of mesothelioma.261

Dr. Welch testified about the epidemiology of asbestos related diseases, the causation of asbestos

related diseases, and what the medical and scientific literature reveals about asbestos exposures

from working with asbestos-containing packing and gaskets and other chrysotile asbestos

products. She testified that it is the general consensus in the scientific community that all

commercially available fiber types of asbestos, including chrysotile asbestos, cause

mesothelioma.262 In discussing the foundations of her opinion, Dr. Welch discussed various

epidemiology studies conducted all over the world showing an increased risk of mesothelioma in

cohorts of people exposed to chrysotile asbestos.263

258 Hr’g Tr. 2082:2-2083:13, 2099:23-2100:8, July 31, 2013 (Welch); ACC-3001.

In regard to fiber potency, Dr. Welch

testified that while amphibole forms of asbestos are likely more potent in causing mesothelioma

on a fiber per fiber basis, many of the studies used to calculate potency differences are outdated.

Indeed, in 2008 a science advisory board convened by the Environmental Protection Agency to

259 Hr’g Tr. 2099:23-2101:3, July 31, 2013 (Welch). 260 Id. at 2089:21-2091:3. 261 Id. at 2102:8-14. 262 Id. at 2104:7-2106:23. 263 Id. at 2111:8-2121:11.


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quantify the differences in fiber types determined that the historical data are not sufficient to

conclude that chrysotile asbestos is less potent than amphibole asbestos.264

58. Dr. Carl A. Brodkin is a physician board-certified in internal medicine and

occupational medicine.

265 In addition, while obtaining a Master’s Degree in Public Health, he

studied epidemiology, toxicology, and industrial hygiene.266 Dr. Brodkin is a co-investigator in

the CARET study involving over 4,000 workers exposed to asbestos, a thousand of which were

pipefitters.267 Dr. Brodkin is a co-editor of the Textbook of Clinical, Occupational and

Environmental Medicine and has published more than 40 peer-reviewed articles on asbestos and

asbestos disease.268 He currently serves as an adjunct clinical associate professor at the

University of Washington.269 The Court accepted Dr. Brodkin as an expert in Occupational and

Environmental Medicine. Dr. Brodkin began his testimony by discussing what is known about

asbestos diseases, the dangers of asbestos gaskets and packing, and when that knowledge came

about.270

264 Id. at 2092:22-2096:10, 2104:7-2106:2, 2188:1-8.

Dr. Brodkin explained how the medical evidence establishes a causal relationship

between the use of gaskets and packing and the development of mesothelioma through the use of

the Bradford Hill causation criteria, first with regard to chrysotile and then specifically with

265 Hr’g Tr. 1917:16-24, July 30, 2013 (Brodkin); ACC-3333. 266 Hr’g Tr. at 1954:10-24, July 30, 2013 (Brodkin). 267 Id. at 1919:25-1920:11. 268 Id. at 1921:18-24, 1923:5-10. 269 Id. at 1923:11-20. 270 Id. at 1927:15-1928:21, 1929:7-14, 1930:13-1931:16, 1934:8-19.


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regard to the fabrication and removal of asbestos gaskets.271 He concluded that chrysotile

asbestos in gaskets and packing is a potent risk factor for mesothelioma.272

59. Dr. Arnold Brody is a research scientist and holds a Ph.D. in cellular biology.

273

Since the mid-1970s, Dr. Brody has conducted extensive work in the area of experimental

pathology for asbestos-related diseases including animal studies and cellular induction studies to

research the potential of the various asbestos fiber types to cause disease in animals and in

humans.274 In addition to writing over 153 peer-reviewed scientific articles (130 of which relate

directly to asbestos) and 55 book chapters and proceedings that relate specifically to the

molecular and cellular aspects of asbestos disease, Dr. Brody has served as faculty at several

medical schools and universities and lectured on pulmonary anatomy and asbestos disease.275

This Court recognized Dr. Brody as an expert in the fields of cell biology and experimental

pathology.276 Dr. Brody provided general causation testimony as it relates to the cancer causing

properties of asbestos and how asbestos fiber inhalation may result in the development of cancer

and other disease processes.277

271 Id. at 1951:5-1952:23, 1952:24-1954:9, 1957:17-1958:1, 1961:1-21, 1967:7-1968:25, 1970:1-23, 1970:24-1971:22, 1973:1-16, 1979:7-12, 1979:13-1980:15, 1980:16-1981:19, 1981:20-1984:6.

Dr. Brody confirmed that all asbestos fiber types, including

chrysotile, have been shown to cause mesothelioma, as well as all other asbestos-related diseases

272 Id. at 1989:14-1990:1. 273 Hr’g Tr. 1818:4-17, July 30, 2013 (Brody); ACC-3562. 274 Hr’g Tr. 1821:21–1822:1, July 30, 2013 (Brody). 275 Id. at 1818:22–1819:3, 1820:11–1821:7. 276 Id. at 1822:2-9. 277 Id. at 1824:12-18; ACC-3566.


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in humans.278 Dr. Brody testified that inhaled asbestos fiber have the ability to damage the

genetic composition of cells.279 Wherever asbestos fibers travel in the human body, they are

capable of causing injuries at the cellular level.280 Based on his published studies, Dr. Brody

opined that chrysotile asbestos is cytotoxic to human and animal macrophages and kills cells that

function as a key component of the body’s natural defense mechanism.281

60. Dr. William Edward Longo holds a Ph.D. in engineering and material sciences.

282

Dr. Longo was offered as an expert in material science, electron microscopy and industrial

hygiene as it relates to asbestos.283 His company, Materials Analytical Services (MAS), an

accredited laboratory, has examined more than 400,000 individual asbestos samples and

performed a variety of tests on the levels of asbestos dust generated during the routine work

practices of installation and removal of gaskets containing up to 80 percent asbestos.284 The

results of the MAS experiments on asbestos fiber release from working with gaskets were

published in the peer-reviewed journal Applied Occupational Environmental Hygiene.285

278 Hr’g Tr. 1858:13-22, 1860:1-18, July 30, 2013 (Brody).

The

MAS experiments, which were based upon the work practices described by pipefitters and

performed by an actual steamfitter, demonstrated that the fabrication and removal of Garlock

asbestos gaskets released asbestos fibers into the work environment at levels magnitudes higher

279 Id. at 1838:5-12, 1847:7-1857:25. 280 Id. at 1853:24-1854:9. 281 Id. at 1858:23-1860:4. 282 Hr’g Tr. 1426:21-22, 1427:6-12, July 29, 2013 (Longo); ACC-3645. 283 Hr’g Tr. 1449:3-7, July 29, 2013 (Longo). 284 Id. at 1427:13-16, 1428:20-22, 1433:3-8, 1463:21-22, 1468:21-25. 285 Id. at 1434:8-19.


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than the background level of asbestos in the ambient air.286 In addition to recording the levels of

asbestos dust generated during the fabrication and removal of gaskets, MAS tested Garlock

asbestos gaskets with a specialized testing protocol to determine their composition and found

that, in addition to up to 80 percent chrysotile asbestos, the gaskets contained trace amounts of

amphibole asbestos, between 100 and 150 million fibers per gram.287

61. James Harold Shoemaker is a certified Nuclear Designer with a Bachelor of

Science Degree in Engineering Technology. In July of 2013, Mr. Shoemaker retired from his

position as a nuclear ship consultant for the United States Navy.

288 Mr. Shoemaker has over fifty

years of experience working at two of the largest shipyards in this country, the Newport News

Shipyard and the Norfolk Naval Shipyard, as a welder helper, a sheet metal helper, a senior

nuclear designer, a Chief Scheduler, a Superintendent of the Sheet Metal Department, a Pipefitter

Superintendant, a Project Superintendent, and Production Manager.289 Mr. Shoemaker was

recognized by this Court as an expert in the work methods, tools and materials used for the

fabrication, removal, replacement and cleanup of gaskets and insulation on naval ships, the

sequencing of work during the construction and overhaul of naval Ships, and the safety

procedures, controls and/or regulations pertaining to asbestos gaskets and insulation on naval

ships from the 1960s through the 1990s.290

286 Id. at 1454:14-16; 1465:1-14, 1474:13-20, 1475:6-13, 1503:12-1505:19.

Mr. Shoemaker testified about his experience

observing and supervising thousands of shipyard workers who fabricated, installed and/or

removed asbestos-containing sheet gaskets and packing, the sequencing of activities that would

287 Id. at 1484:5-10, 1485:1-7, 1489:1-11. 288 Hr’g Tr. 1634:8-16, 1636:3-20, July 29, 2013 (Shoemaker); ACC-3781. 289 Hr’g Tr. 1637:12-1641:14, July 29, 2013 (Shoemaker); ACC-3781, ACC-5063(a). 290 Hr’g Tr. 1648:12-1649:1, 1651:8-1652:13, July 29, 2013 (Shoemaker).


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take place during the overhaul of Naval vessels, as well as the safety controls and regulations

pertaining to asbestos gaskets and insulation.291 He confirmed that Dr. Longo’s videotapes

depicting the tools and methods pertaining to the fabrication and removal of asbestos sheet

gaskets were substantially similar to the ways in which asbestos gaskets were fabricated and

removed by real-world workers in the shipyard and aboard ships during overhauls.292

62. Philip John Templin is a Certified Industrial Hygienist with a Master of Science

degree in public health.

293 Asbestos has been an area of interest for him from the very first

weeks of graduate school and throughout his professional career.294 The Court accepted Mr.

Templin as an expert in industrial hygiene.295 Initially, Mr. Templin discussed the history of

industrial hygiene as it related to protecting workers from exposures to asbestos.296 Mr. Templin

next compared the level of asbestos in the background ambient air with the levels of asbestos

generated during the fabrication and removal of gaskets.297 Finally, Mr. Templin testified about

the mandatory industrial hygiene procedures currently in force for any work with an asbestos

gasket that is deteriorated and unlikely to be removed intact.298 In addition, the worker

performing these tasks must be attired in full-body protective coveralls with respiratory

protection.299

291 Id. at 1641:19-1648:11, 1669:13-1670:25, 1685:3-1688:5.

292 Id. at 1671:10-14, 1679:3-11. 293 Hr’g Tr. 1727:25-1728:25, July 30, 2013 (Templin); ACC-3251. 294 Hr’g Tr. 1730:9-14, July 30, 2013 (Templin). 295 Id. at 1733:8-17. 296 Id. at 1732:16-24, 1733:19-1734:21. 297 Id. at 1748:1-1750:15, 1752:2-1753:13. 298 Id. at 1761:21-1763:2. 299 Id. at 1759:24-1761:20.


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B. Garlock’s Manufacture and Sale of Asbestos Products

63. For many years, Garlock sold asbestos-containing industrial sealing products and

related materials and other asbestos-containing products, including gaskets, gasket materials and

compression packing. Garlock first produced and sold asbestos-containing gaskets, compressed

asbestos sheets, and packing in 1907. It sold asbestos-containing packing until 1982 and

asbestos-containing gaskets until 2001. 300

64. Garlock sold rolls or sheets of asbestos gasket material to both distributors and

end-use customers who cut out gaskets.

301 Garlock also sold pre-cut asbestos gaskets for

various applications, such as gaskets for use in various models of boilers.302

65. In addition to gaskets and gasket material, Garlock sold asbestos packing in coils,

spirals, and rolls.

303 Garlock also sold loose asbestos packing, a shredded asbestos material

packaged in cans.304

66. Many Garlock products consisted of as much as 85 percent asbestos; most were of

the chrysotile variety, but some Garlock products contained crocidolite asbestos.

305

300 For example, Garlock made asbestos-containing tape, expansion joints, hydraulic components, and asbestos cloth. Heffron Dep. 23:14-23, 70:4-9, 120:2-11, 123:4-22. Nov. 13, 2012; ACC-68 at GST-EST-0108977-78; ACC-515, at 10-11; ACC-69.

In general,

301 A gasket is a static mechanical seal that joins two or more mating surfaces, such as flanges where pipes connect, or where a pipe connects to equipment such as a valve or pump. 302 Heffron Dep. 198:15-199:22, Nov. 13, 2012. 303 Packing generally refers to material that forms a seal between a static component and a moving part, like a valve stem or drive shaft. 304 Heffron Dep. 203:5-204:9, Nov. 13, 2012. 305 ACC-69. Asbestos insulation products often contain lower percentages of asbestos. Hr’g Tr. 1469:1-1470:1, July 29, 2013 (Longo).


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Garlock’s products were prominently branded.306 Garlock’s gaskets and packing bore no

warnings concerning the dangers of asbestos until 1977.307

67. Garlock’s asbestos-containing gaskets and packing were sold widely to

commercial, industrial and government entities that used those products to seal fluids and gases

in pipes, valves, pumps, boilers, engines, and other mechanical devices.

308

68. Industrial customers included petrochemical facilities, shipyards, steel mills,

chemical plants, breweries, mining operations, and waste and water treatment plants.

309 These

customers used Garlock products in, among other settings, steam lines, boilers, compressors,

refrigeration equipment, engine heads, and fluid conduits.310

69. Garlock products were widely used by the US Navy. For example, Garlock was

one of the main manufacturers of asbestos sheet gaskets commonly used at the Norfolk Naval

Shipyard and the Newport News Shipyard.

311 The Navy required asbestos-containing sheet

gaskets to be used in association with numerous shipboard systems including but not limited to

low pressure steam systems, sea water systems, and fuel systems.312

306 ACC-68 at GST-EST-0108980. See, e.g., Hr’g Tr. 1393:5-18, July 26, 2013 (Magee) (noting that the conspicuous branding of Garlock’s products).

Spiral wound gaskets, or

“Flexitallic” asbestos gaskets were typically used in connection with high pressure steam

307 ACC-68 at GST-EST-0108970. 308 See, e.g., ACC-254 (EnPro Indus., Inc. 2003 10-K) at 23-24; ACC-149 (EnPro Indus., Inc. 2007 10-K) at 7. 309 Heffron Dep. at 49:23-50:2, 60:24-61:12, 138:18-140:16, 143:25-144:17, Nov. 13, 2012; ACC-75; ACC-80. 310 ACC-68 at GST-EST-0108978; ACC-80. 311 Hr’g Tr. 1668:5-22, July 29, 2013 (Shoemaker). 312 Id. at 1641:19-1642:22.


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systems and hot water systems.313 The gaskets typically specified for use aboard naval ships,

however, were asbestos sheet gaskets used on low pressure steam systems (300 psi and

below).314

70. Approximately 40 to 50 percent of the gaskets found in the engine rooms aboard

naval ships consisted of asbestos sheet gaskets.

315

71. As a result of the extensive distribution of Garlock products, individuals in a

variety of occupations were exposed to Garlock asbestos-containing products, such as pipefitters,

millwrights, shipwrights, boilermakers, and machinists.

316

72. Individuals were exposed to asbestos fibers from Garlock products in different

ways. Fibers were released from Garlock products when the products were cut or manipulated

during installation, or as they were removed during maintenance.

317

73. For example, asbestos fibers were released during the removal and installation of

gaskets on Navy ships at Norfolk Naval Shipyard.

318

313 Id. at 1663:7-21.

During maintenance of shipboard pipes

and valves, gaskets had to be replaced. The exposure first occurred as old gaskets were removed

from pipe flanges and valves. After the flange was separated, the old gasket had to be removed.

314 Id. 315 Id. at 1663:7-1664:16. 316 Grant Dep. 200:4-8, Nov. 1, 2011; Hr’g Tr. 1473:18-1474:3, July 29, 2013 (Longo). 317 Hr’g Tr. at 1474:13-1475:13, 1514:11-24, July 29, 2013 (Longo). 318 Hr’g Tr. 1652:15-1679:11, July 29, 2013 (Shoemaker).


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74. In many cases, the old gasket would be dried out and firmly stuck to the seating

areas of the flange, such that removal required cleaning with a power-driven wire brush, as well

as scraping with a variety of tools.319

75. The removal process produced dust, particularly during wire-brushing.

320 Re-

assembling the flange required the fabrication and installation of a new gasket. In most cases,

the worker cut the new gasket from rolls of sheet gasket material. The worker cut the sheet and

placed it against the flange to mark the bolt holes and flange openings. Bolt holes were cut out

with punches and knives were used to cut out the flange openings.321 This process of cutting and

installing a new gasket also could also produce substantial amounts of asbestos-containing

dust.322

76. Asbestos fibers can cause a variety of illnesses. These include non-cancerous

lung diseases (called “non-malignant” diseases), and cancers such as mesothelioma. Non-

malignant diseases include, for example, asbestosis, a pulmonary insufficiency caused by

destruction of the air sacs in lung tissue.

323

77. Mesothelioma is a rare form of cancer in which cancerous

cells are found in the

mesothelium, a protective sac that covers most of the body’s internal organs.324

319 Hr’g Tr. 1671:15-1673:13, July 29, 2013 (Shoemaker); Borgen Dep. 40:22-23, 41:3-12, June 1, 2000; Hyder Dep. 25:18-26:5, 26:6-7, 10, 28:5-12, 28:15-21, Mar. 15, 2000 (Vol. 1); Isaacs Dep. 100:21-101:7, June 1, 2000; Maney Dep. 43:21-45:9, May 9, 2001.

Mesothelioma

320 Hr’g Tr. 1647:17-25, July 29, 2013 (Shoemaker). 321 Hr’g Tr. 1669:13-1671:14, July 29, 2013 (Shoemaker). 322 Hr’g Tr. 1671:10-14, July 29, 2013 (Shoemaker); Hr’g Tr. at 1472:22-1475:19, July 29, 2013 (Longo). 323 In re Joint E. & S. Dist. Asbestos Litig., 129 B.R. 710, 739-40 (E. & S.D.N.Y. 1991), judgment vacated on other grounds by 982 F.2d 721 (2d Cir. 1992). 324 Hr’g Tr. 1837:19-1838:4, July 30, 2013 (Brody).


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generally kills victims within two years of diagnosis.325 The latency period for mesothelioma is

35 years.326

78. Unlike many other cancers, for which there are multiple, well-documented causal

factors, mesothelioma is uniquely associated with asbestos exposure.

327 Mesothelioma is caused

by both chrysotile and amphibole forms of asbestos.328

C. Garlock’s Asbestos Litigation History

79. Asbestos litigation began in the mid-1970s. Litigation initially focused on large

asbestos suppliers and insulation companies who had stopped manufacturing and selling

asbestos-containing products in the 1970s, most notably Johns-Manville.329 Other defendants

were able to remain in a peripheral role while Manville took the lead defending and settling

cases.330

80. In 1982, less than a decade after the litigation began, Manville filed for

bankruptcy.

331 When Manville filed for bankruptcy, plaintiffs began to focus their efforts

elsewhere, developing the case against other defendants.332

325 In re Joint E. & S. Dist. Asbestos Litig., 129 B.R. at 740; Hr’g Tr. 1866:4-7, July 30, 2013 (Brody).

326 Hr’g Tr. 355:23-356:5, July 23, 2013 (Garabrant); Hr’g Tr. 469:15-18, July 23, 2013 (Sporn); Hr’g Tr. 1083:9-14, July 25, 2013 (Weill). 327 Hr’g Tr. 1971:2-11, July 30, 2013 (Brodkin). 328 Hr’g Tr. 2104:7-2105:19, July 31, 2013 (Welch). 329 Hr’g Tr. 3420:11-3421:19, Aug. 6, 2013 (Hanly); Hr’g Tr. 3539:15-3540:4, Aug. 7, 2013 (Rice); Hr’g Tr. 3478:10-14, Aug. 7, 2013 (McClain); Hr’g Tr. 3796:13-20, Aug. 8, 2013 (Hanly). 330 Hr’g Tr. 3431:25-3433:19, 3426:13-3427:22, Aug. 6, 2013 (Hanly). 331 Hr’g Tr. 3426:13-16, Aug. 6, 2013 (Hanly). 332 Hr’g Tr. 3540:5-8, Aug. 7, 2013 (Rice).


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81. Additional asbestos bankruptcies then occurred throughout the 1980s and 1990s,

including those of Raybestos Manhattan, Celotex, Eagle Picher, and Keene.333 As these

defendants filed for bankruptcy, a newer generation of peripheral defendants became the focus of

litigation.334 The early 2000s saw this cycle continue, with bankruptcies such as Owens

Corning, U.S. Gypsum, and Babcock & Wilcox.335

82. Meanwhile, the nature of asbestos claims was changing. In the 1990s, claims by

individuals suffering from non-malignant asbestos diseases predominated. As the exposed

population aged, however, the type of claimant changed. Many individuals who had been

exposed to massive amounts of asbestos-containing material as insulators began to die off. The

exposure profile of the claimant population changed somewhat over time.

336

83. Courts also began to adopt various measures to limit non-malignant claims, such

as moving malignant cases ahead in the trial queue.

337 As a result, throughout the 2000s,

asbestos litigation began to focus increasingly on mesothelioma claims.338 Today, mesothelioma

and other cancer claims predominate in asbestos litigation.339

84. Garlock was first named in an asbestos personal injury case in 1975.

340

333 Hr’g Tr. 3426:2-12, Aug. 6, 2013 (Hanly).

When

Manville filed for bankruptcy in 1982, Garlock joined other defendants in an unsuccessful

334 See In re Joint E. & S. Dist. Asbestos Litig., 129 B.R. at 747. 335 Hr’g Tr. 3431:21-3435:9, Aug. 6, 2013 (Hanly). 336 Hr’g Tr. 3472:4-3473:24, Aug. 7, 2013 (McClain). 337 Hr’g Tr. 3550:25-3551:15, Aug. 7, 2013 (Rice). 338 Hr’g Tr. 3551:11-15, Aug. 7, 2013 (Rice). 339 Id. 340 ACC-19 (EnPro Indus., Inc. 2005 10-K) at 30. Garlock was involved in the Borel case, the first appellate decision to apply strict products liability in tort to asbestos claims. Hr’g Tr. 81:24-(Footnote continued on next page.)


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motion to have asbestos litigation around the country stopped because Manville had been bearing

the majority of defense costs and settlement outlays, to the advantage of less prominent

defendants, but was no longer participating in the litigation by virtue of the automatic stay.341

By the early 1990s, Garlock was being sued by more than 20,000 asbestos claimants annually.342

Nevertheless, throughout the 1980s and well into the 1990s, Garlock was able to remain as a

peripheral defendant.343

85. Garlock’s experience changed in the late 1990s and early 2000s. Around this

time plaintiffs began to develop the liability case against Garlock by, for example, using experts

to explain how Garlock’s products emitted asbestos fibers.

344

86. Garlock’s prominence as an asbestos defendant began to increase. By the early

2000s, Garlock was receiving about 50,000 claims annually, including between 1,100 and 1,900

mesothelioma claims per year.

345 In addition, by the latter half of the 2000s, and consistent with

the general trends noted above, mesothelioma claims predominated against Garlock.346

87. Mesothelioma claimants who sued Garlock asserted a range of causes of action

under various state laws, such as strict products liability, failure to warn of the hazards of

(Footnote continued from previous page.) 82:13, Mar. 3, 2011 (Glaspy). See Borel v. Fibreboard Paper Prods. Corp., 493 F.2d 1076 (5th Cir. 1973). 341 Hr’g Tr. 3426:13-3427:22, Aug. 6, 2013 (Hanly); ACC-343. 342 ACC-14 at GST-EST-120780. 343 Hr’g Tr. 3876:8-21, Aug. 8, 2013 (Peterson). 344 Hr’g Tr. 3874:9-22, Aug. 8, 2013 (Peterson); Mahoney Dep. 50:12-53:18, Feb. 26, 2013; Hr’g Tr. 3793:10-3796:3, Aug. 8, 2013 (Hanly). 345 ACC-14 at GST-EST-120780; Hr’g Tr. 3901:1-15, Aug. 8, 2013 (Peterson); ACC-824a at 37. 346 Magee Dep. 69:5-71:10, Jan 23, 2013.


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asbestos, and negligence.347 They alleged that workers cutting and removing Garlock’s asbestos-

containing gaskets and packing were exposed to dangerous quantities of airborne asbestos fibers

from those products, as were other workers in the workplaces where such activities took place.348

88. Plaintiffs adduced at trial, among other things, that the dangers of asbestos

products have been well-known since the 1930s. One of the first articles to address the potential

hazards related to exposure to chrysotile asbestos was published in England in 1930 by

Meriwether and Price.

349 Recognizing the potential danger associated with exposure to

chrysotile asbestos, Meriwether and Price recommended that dust producing operations be

enclosed or physically separated from the rest of the facility, that asbestos materials be wet down

to suppress dust, that workers be supplied with respirators and, finally, that workers be educated

so that they have an appreciation of the risk.350 Among the processes identified by Meriwether

and Price which, in 1930, were known to cause asbestosis are the sawing, grinding, and turning

in a dry state packings and jointings.351

89. Plaintiffs contended Garlock was well aware of the danger of asbestos.

Employees of Garlock had attended meetings of the Asbestos Textile Institute (“ATI”) in the

mid and late 1950s where presentations were made regarding issue of asbestos and cancer of the

lung.

352

347 Hr’g Tr. 57-69, Feb. 17, 2011 (Simon); Hr’g Tr. 3458:24-3459:24, Aug. 7, 2013 (McClain).

Garlock was also aware of the particular risk of mesothelioma. At a meeting of the ATI

348 Hr’g Tr. 57-69, Feb. 17, 2011 (Simon). 349 Hr’g Tr. 1732:16-24, 1733:19-1734:21, July 30, 2013 (Templin). 350 Id. at 1735:3-22. 351 Id. at 1736:24-1737:22. 352 Id. at 1738:22-1739:25; ACC-3312; ACC-3313.


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in 1969, it was acknowledged that the “asbestos hazard can be controlled except for

mesothelioma.”353

90. Garlock raised a variety of defenses to these claims. It maintained that it had no

duty to warn; that the asbestos fibers in its products were “encapsulated” so that they did not

emit dangerous quantities of fibers; that its asbestos-containing products contained mainly

chrysotile, which Garlock alleged does not cause mesothelioma; and that plaintiffs’

mesothelioma must be attributed to exposures to other asbestos products, such as insulation that

Garlock did not manufacture or sell but that was present in the industrial settings where its

products were used.

354 Garlock deployed these defenses consistently throughout the 1990s and

2000s.355 The same “encapsulation,” “chrysotile,” and “low-dose” defenses are commonly

asserted by other defendants still in the tort system.356

D. Garlock’s Management of Asbestos Liability

91. Garlock resolved the overwhelming majority of claims consensually—by

settlement or voluntary dismissal.357 Although Garlock faced approximately 700,000 asbestos

claims, Garlock tried only 245 cases to verdict, or less than 0.1 percent.358

353 Hr’g Tr. 1744:2-1745:9, July 30, 2013 (Templin); ACC-3315.

With respect to

354 ACC-17 (2002 EnPro Indus., Inc. Form 10-K) at 16; ACC-18 (2004 EnPro Indus., Inc. Form 10-K) at 25; ACC-19 (2005 EnPro Indus. Inc., Form 10-K) at 31. 355 Grant Dep. 128:11-129:25, 130:2-132:5, 132:7-133:5, 133:7-15, Nov. 1, 2011. 356 See Hr’g Tr. 3464:7-20, Aug. 7, 2013 (McClain). 357 Grant Dep. 172:25-173:12, Nov. 1, 2011; Garlock 30(b)(6) Dep. (Magee) 23:24-24:2, Jan. 24, 2013; Hr’g Tr. at 3208:7-11, Aug. 6, 2013 (Magee). 358 Grant Dep. 172:25-173:12, Nov. 1, 2011; Hr’g Tr. 3889:2-7, Aug. 8, 2013 (Peterson).


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mesothelioma claims, Garlock faced more than 20,000 cases, but tried only 83 to verdict, less

than one-half of one percent.359

92. As Garlock disclosed in its parent’s annual reports, it considered various merits-

based factors when entering into settlements, including the plaintiff’s age and occupation; the

jurisdiction where the action was brought; the presence of other possible causes of the plaintiff’s

mesothelioma; alternative sources of payment available to the plaintiff from co-defendants and

section 524(g) trusts; the availability of legal defenses; and whether the action was an individual

one or part of a group.

360 Garlock tried cases when they determined a settlement demand was

not reasonable.361 Before Garlock paid a settlement it required that the plaintiff provide both

medical records confirming diagnosis of disease and evidence that he or she had worked with or

around an asbestos product of Garlock.362 When settling a case, Garlock did not pay to resolve

more than its own several share of liability (and that of affiliated companies).363 Consequently,

in settlement, Garlock obtained releases for all affiliated companies, but not for unrelated

companies.364

93. Garlock’s settlement-based strategy allowed Garlock to maintain a low profile in

the litigation throughout most of the 1990s.

365

359 Hr’g Tr. 2918:22-2919:4, Aug. 5, 2013 (Bates).

As part of this strategy, Garlock often settled

360 ACC-156 (EnPro Indus., Inc. 2006 10-K) at 34. 361 ACC-254 (EnPro Indus., Inc. 2003 10-K) at 79; see also Hr’g Tr. 3204:1-3205:9, Aug. 6, 2013 (Magee). 362 Magee Dep. 300:5-19, Apr. 11, 2013; Hr’g Tr. 3195:7-20, Aug. 6, 2013 (Magee); Hr’g Tr. 2363:23-2364:15, Aug. 1, 2013 (Turlik). 363 Ferrell Dep. 145:22-146:17, Jan. 11, 2013. 364 Grant Dep. 40:2-15, Nov. 1, 2011; Hr’g Tr. 3195:21-3196:2, Aug. 6, 2013 (Magee). 365 Hr’g Tr. 3873:2-18, Aug. 8, 2013 (Peterson).


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claims in groups.366 For example, Garlock settled 81 percent of mesothelioma claims in groups

in the period 1996 to 2000.367 As plaintiffs began to develop the liability case against Garlock in

the 2000s, Garlock relied even more on group settlements.368 It preferred to settle early, that is,

before devoting resources to investigating the details of claims.369

94. Settlement allowed Garlock to control its exposure to catastrophic verdicts.

Garlock acknowledged this risk in securities filings, when it explained that the risk of adverse

verdicts led it to use group settlements.

370

95. Garlock’s own internal assessments underscore its concerns about potentially

adverse verdicts. Garlock’s internal procedures for approving settlements involved the creation

of a document called a “Major Expense Project Approval” form (“MEA”) to memorialize the

reasons for entering into the proposed settlement.

371 Internal procedures required that MEAs for

individual and group settlements over certain thresholds be signed by senior management. The

MEAs confirm Garlock was aware of and concerned about substantial adverse verdicts, and

settlement was motivated by that concern. The MEAs recognize that settling in groups

eliminated these risks in a cost-effective way.372

366 ACC-19 (EnPro Indus., Inc. 2005 10-K) at 37.

In other words, Garlock priced risk across

367 Hr’g Tr. 3880:12-21, Aug. 8, 2013 (Peterson); ACC-824a at 17. 368 Hr’g Tr. 3880:22-3881:6, Aug. 8, 2013 (Peterson); ACC-824a at 17. 369 Hr’g Tr. 2576:3-12, Aug. 1, 2013 (Magee); Hr’g Tr. 3196:7-16, Aug. 6, 2013 (Magee). 370 ACC-149 (EnPro Indus., Inc. 2007 Form 10-K) at 33. 371 See, e.g., ACC-754 at GST-EST-0556312. 372 ACC-341; ACC-754 at GST-EST-0556290.


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batches of claims and sought to extinguish as many claims as possible with an eye to minimizing

its overall cash outlays for asbestos matters.373

96. Garlock’s inside and outside counsel were aware of the risk of adverse liability

findings at trial, and weighed those risks carefully when settling cases.

374

97. Despite the threat of adverse verdicts, Garlock did try mesothelioma cases from

time to time. While it won more often than it lost, Garlock also suffered the catastrophic verdicts

it feared. The Treggett case in California was one such case, where Garlock suffered a verdict in

excess of $22 million in 2005, including punitive damages.

375 While Garlock typically appealed

these losses, and sometimes settled them for an amount less than the jury verdict, even the appeal

bonds required could affect Garlock’s overall financial situation negatively, by tying up needed

cash.376

98. Garlock avoided these risks by entering into group settlement arrangements with

individual plaintiff law firms. Group settlements took many forms. Some were formal written

373 Hr’g Tr. 3122:21-3123:1, Aug. 5, 2013 (Magee). 374 Hr’g Tr. 4662:19-25, Aug. 22, 2013 (Glaspy). See also Hr’g Tr. 3251:18-20, Aug. 6, 2013 (Magee) (“And there’s no question, absolutely no question, that that made these dangerous cases with real risks at trial.”) (discussing ACC-770); Hr’g Tr. 3237:3-4, Aug. 6, 2013 (Magee) (“There is certainly risk and expense, and it’s prudent to resolve it. I’ll agree with that conclusion.”); Hr’g Tr. 3240:20-3241:5, Aug. 6, 2013 (Magee) (discussing ACC-767); Hr’g Tr. 3249:21-3250:6, Aug. 6, 2013 (Magee) (discussing ACC-770); Hr’g Tr. 3262:6-13, Aug. 6, 2013 (Magee) (discussing Fowers case); Hr’g Tr. 2376:7-8, Aug. 1, 2013 (Turlik) (“When we settle a case, it’s for two reasons. It’s to eliminate trial risk and trial costs. So, yes.”); Hr’g Tr. 2532:13-18, Aug. 1, 2013 (Turlik); Mahoney Dep. 27:23-31:6, Feb. 26, 2013; Drake Dep. 58:11-59:11, Nov. 7, 2012; Henzel Dep. 32:15-19, Nov. 14, 2012; O’Reilly Dep. 169:7-19, Feb. 22, 2013; Grant Dep. 216:11-18, Nov. 1, 2011; Hr’g Tr. 88:6-9, Mar. 3, 2011 (Glaspy) (Q. “As a seasoned defense attorney, you recognized, didn’t you, that Garlock had good and sufficient reason to settle its cases? A. Yes, the risk of trial.”). 375 ACC-244. 376 Hr’g Tr. 3075:2-24, Aug. 5, 2013 (Magee); Hr’g Tr. 3262:14-22, Aug. 6, 2013 (Magee). On occasion, Garlock also settled cases during or after trial but before a verdict was reached. Hr’g Tr. 2304:13-2310:6, Aug. 1, 2013 (Turlik).


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arrangements designed to last for several years setting out target average settlement amounts and

annual caps on the amounts that would be paid to claimants of a given plaintiff law firm.377

Others were less formal understandings by which Garlock would negotiate groups of cases on a

yearly basis, or as cases were periodically set for trial.378

99. When Garlock settled, it was aware that plaintiffs often had exposure to other

asbestos-containing products.

379 It never, however, required representations or other provisions

concerning those other exposures, or trust claims that the plaintiffs may make as a result of those

exposures, in its settlements.380

100. Until the late 2000s, Garlock settled cases against the backdrop of its available

insurance resources. Beginning in the 1980s, Garlock had negotiated a series of “coverage in

place” agreements with its insurers so that by the late 1990s, Garlock was receiving periodic

payments of funds from insurers to deal with asbestos litigation.

381 Some insurers retained the

right to audit settlements. Garlock has passed all such audits that have been completed.382

377 E.g., ACC-215; see also Ferrell Dep. 69:7-76:3, 76:6-77:15, Jan. 11, 2013.

Garlock’s overall strategy for managing asbestos liability focused on arranging settlements so

378 E.g., ACC-658. 379 Hr’g Tr. 2526:20-2528:10, Aug. 1, 2013 (Turlik); Hr’g Tr. 3133:3-9, 3136:3-7, Aug. 5, 2013 (Magee). 380 Hr’g Tr. 2528:5-16, Aug. 1, 2013 (Turlik); Hr’g Tr. 3136:14-25, Aug. 5, 2013 (Magee); 4666:10-14, Aug. 22, 2013 (Glaspy). 381 Grant Dep. 208:18-209:20, Nov. 1, 2011; see also Hr’g Tr. 3207:12-3203:22, Aug. 6, 2013 (Magee). 382 Barry Dep. 137:2-139:3, 139:17-141:19, Nov. 6, 2012.


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that the timing of insurance receipts matched settlement payments as closely as possible, thereby

reducing the effect of the settlements on net income and shareholders’ equity.383

101. By the mid 2000s, however, Garlock recognized that insurance receipts would

soon be fully committed and asbestos settlements would begin to have a more visible impact on

the company’s financials.

384 One result is that, Garlock began to cite Garlock’s tightening

financial situation in negotiations with plaintiffs’ firms for lower settlements.385

102. Throughout its decades in the tort system, Garlock had sophisticated in-house

personnel dedicated to managing Garlock’s asbestos litigation and a nationwide roster of outside

defense counsel.

386

E. Garlock’s Prepetition Estimates of Liability

103. Prior to filing their bankruptcy petition, Garlock and its corporate parents

regularly estimated their present and future asbestos liabilities using an estimation method based

on Garlock’s own resolution history and epidemiologically-derived forecasts of future claims.

The first estimate described in testimony is one prepared for Garlock’s parent company, Coltec

Industries, in connection with a tax issue in the mid-1990s.387

383 Magee Dep. 36:19-25, 42:19-49:21, Jan. 23, 2013; Hr’g Tr. 3366:21-3367:4, Aug. 6, 2013 (Magee).

384 Magee Dep. 131:7-132:9, Jan. 23, 2013; Hr’g Tr. 3368:2-12, Aug. 6, 2013 (Magee). 385 Hr’g Tr. 3878:10-19, Aug. 8, 2013 (Peterson); Hr’g Tr. 4640:11-4641:1, Aug. 22, 2013 (Glaspy). 386 ACC-7; ACC-9; ACC-10. 387 See, e.g., ACC-171.


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104. Garlock’s ultimate parent, EnPro Industries, Inc., used a similar estimation

method for its periodic internal management estimates of Garlock’s asbestos related liability

until 2010.388

105. Dr. Charles Bates, Garlock’s estimation expert here, also prepared estimates of

Garlock’s present and future asbestos liabilities for EnPro’s quarterly and annual financial

reports from 2005 until Garlock went bankrupt in 2010 using a variant of the same method.

389

F. Expert Estimates of Aggregate Liability for Mesothelioma Claims

i. Dr. Mark A. Peterson

106. To estimate Garlock’s aggregate liability for present and future mesothelioma

claims, Dr. Peterson makes use of Garlock’s history of resolving asbestos claims as recorded in

Garlock’s own historical claims database. Pending and future claims are estimated separately,

although the steps are similar.

107. To estimate pending claims, Dr. Peterson first determines the number of pending

mesothelioma claims in the Garrison Database.390

108. Estimation of Garlock’s liability for future asbestos claims proceeds along similar

lines. Two extra steps are required, however. First, Dr. Peterson needs to predict how many

He then reviews Garlock’s settlement history

during a period, called a “calibration period,” to determine the percentage of claims that are

likely to be paid by Garlock rather than dismissed, and to determine the average settlement value

for those claims that are paid. Pending claims are then valued by multiplying the paid claims by

the average settlement value.

388 E.g., ACC-621 (EnPro Indus., Inc., 2008 10-K) at 88. 389 Hr’g Tr. 2877:19-2879:11, Aug. 5, 2013 (Bates). 390 Hr’g Tr. 3882:22-3883:7, Aug. 8, 2013 (Peterson).


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mesothelioma claims Garlock will face in future years. Dr. Peterson does this by using a well-

known forecast by Dr. William J. Nicholson and others at Mt. Sinai Hospital of the number of

people who will die from mesothelioma in the United States through 2030.391 Courts have

embraced the Nicholson Study as “remarkably accurate over time.”392

109. To estimate what fraction of the persons stricken with mesothelioma in the future

will bring a claim against Garlock, Dr. Peterson divides the number of mesothelioma claims

Garlock received during the calibration period by the incidence of mesothelioma during that

period.

Dr. Peterson extends that

projection to cover additional years through 2049.

393

110. The number of mesothelioma claims Garlock will face in each future year is then

estimated by multiplying Nicholson’s projected number of mesothelioma deaths in that future

year by the propensity to sue.

This fraction is called the “propensity to sue.”

394

111. These projected future claims against Garlock are then valued using the same

formula that is used for pending claims. Average settlement values are, in future years, adjusted

for inflation. The result is a series of estimates of the nominal amount Garlock would pay in

each future year through 2049.

112. The final step is to reduce these future payments to a present value.395

391 W.J. Nicholson et al., Occupational Exposure to Asbestos: Population at Risk and Projected Mortality – 1980-2030, 3-3 Am. J. Indus. Med. 259, 259-311 (1982).

This is

done using discount rates supplied by a financial expert.

392 In re Armstrong World Indus., Inc., 348 B.R. 111, 126-27 (D. Del. 2006). 393 Hr’g Tr. 3891:6-18, Aug. 8, 2013 (Peterson). 394 Id. at 3893:3-23. 395 Id. at 3890:1-13.


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113. Dr. Peterson applied the method described above and arrived at a preferred

forecast of Garlock’s present and future asbestos liability of $1.265 billion.396

114. Dr. Peterson chose as his calibration period the interval 2006-May 2010.

397

Because this period is the most recent period of settlement history prior to bankruptcy, Dr.

Peterson believed it is the period most likely to resemble what Garlock would have experienced

since June 2010 and in the future had it not filed for bankruptcy.398 Furthermore, an analysis of

mesothelioma settlement values and payment rates showed that prior to that interval, payment

rates had been trending down and settlement values had been trending up. Dr. Peterson testified

that the 2006-2010 interval was the most stable in this respect.399

115. Dr. Peterson uses average settlement amounts and payment rates from this 2006

to May 2010 period.

400 For propensity to sue, the primary estimate begins with the average from

the calibration period and then continues an upward trend in the propensity to sue that existed in

the 2006-2010 period. It assumes that the increasing propensity to sue will stabilize and level off

after 2014.401

116. Dr. Peterson increases future settlement payments by a 2.5 percent inflation rate

and then reduces those future payments to present value using a discount rate provided by the

Committee’s financial expert, Kenneth W. McGraw.

396 Id. at 3903:13-17. 397 Id. at 3884:7-16. 398 Id. at 3884:7-16. 399 Id. at 3885:20-3887:20. 400 Id. at 3902:3-5. 401 Id. at 3898:5-3899:23.


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117. Mr. McGraw used U.S. Treasury securities to determine the risk-free rate because

Treasury securities are accepted by financial markets as “risk free.”402 He calculated the

discount rate separately for each year of future payments forecasted by Dr. Peterson. The

appropriate risk-free discount rates to apply to the future indemnity payments for each year are

the yields reflected in the marketplace, as of June 4, 2010, on U.S. Treasury securities with

maturities corresponding to these payments. Taking account of the timing and relative weighting

of the annual payments constituting the stream, the year-by-year discount rates applicable are the

mathematical equivalent of an overall discount rate of 3.251 percent.403

118. Dr. Peterson’s estimation method has been widely used in legal proceedings and

in the financial and corporate communities. The method has been frequently used for planning

and financial reporting by companies that face asbestos liabilities.

404 Garlock and its corporate

parents have used essentially this same method for almost 20 years, beginning with Coltec in

connection with a tax issue in the mid-1990s.405 Garlock’s ultimate parent, EnPro, used a variant

for its periodic internal management estimate of Garlock’s asbestos-related liability until

2010.406

402 McGraw Report at 4-6.

So, too, did Dr. Charles Bates, Garlock’s estimation expert here, when he prepared

403 Id. at Exh. 9. 404 E.g., Crown Holdings, Inc., Annual Report (Form 10-K) at 38 (Mar. 1, 2013) (“Projected future claims are calculated based on actual data for the most recent five years. Outstanding and projected claims are multiplied by the average settlement cost of those claims for the most recent five years.”); Ingersoll-Rand PLC, Annual Report (Form 10-K) at F-44 (Feb. 14, 2013) (describing “methodology used to project the Company’s total liability for pending and unasserted potential future asbestos-related claims” based on epidemiological studies estimating the number of people likely to develop diseases such as mesothelioma, propensity to sue based on most recent three-year claims history, and the average settlement and resolution value of claims for the most recent three years). 405 See, e.g., ACC-171. 406 E.g., ACC-621 (EnPro Indus., Inc. 2008 10-K) at 88.


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estimates of Garlock’s asbestos liabilities for EnPro’s quarterly and annual financial reports from

2005 until Garlock went bankrupt in 2010.407

119. The criticisms of Dr. Peterson offered by Drs. Bates and Gallardo-García are

without merit. The increasing trend Dr. Peterson incorporated into his propensity to sue is

appropriate given Garlock’s litigation history and the associated data.

408 Dr. Peterson’s use of an

inflation rate of 2.5 percent to increase average settlement rates in the future and an overall

discount rate of 3.251 (weighted to account for the timing of payments in his forecast) are

correct. And Dr. Bates was mistaken to suggest that Dr. Peterson’s estimate is inflated by a

failure to take into account the geographic distribution of pending claims as compared to claims

settled during the calibration period of 2006 to 2010 – indeed, when this is done not just for two

states, as Dr. Bates did, but nationwide, the overall settlement average increases.409

120. The suggestion by Drs. Bates and Gallardo-García that Dr. Peterson made data

processing errors that affected his estimate is wrong. If Dr. Peterson had removed cases from the

database based on information generated in the Mesothelioma Claims Questionnaire (“MCQ”)

as they suggest, it would have improperly skewed the count of mesothelioma cases lower,

because the MCQ provides no basis for a correlative adjustment for mesothelioma claims

misrecorded in the database as involving other asbestos diseases.

410 Dr. Peterson’s assumption

that pending claims would be paid over the 2010-2012 period is equivalent under his method to

their being paid in 2011, but this has a negligible effect on his estimate.411

407 Hr’g Tr. 2877:19-2879:11, Aug. 5, 2013 (Bates).

Dr. Gallardo-García’s

408 Hr’g Tr. 3962:18-24, Aug. 8, 2013 (Peterson). 409 Id. at 3963:7-3964:12. 410 Id. at 3959:3-3960:21. 411 Id. at 3953:4-10.


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complaint that Dr. Peterson counted three verdicts in the wrong year by using the date of the last

related entry in the database, rather than the year of the verdict, is off base. Using the last-related

date in the database was a sensible way to assign a date to an event with multiple payment dates,

particularly since Garlock often tied up verdicts on appeal for years. Furthermore, whether

recognized in the year of first payment or that of last offset, these verdicts would fall within the

calibration period used by Dr. Peterson, so the differences would not affect his estimate.

ii. Dr. Francine Rabinovitz

121. Dr. Rabinovitz relied on Garlock’s historical claims database, which contains

information concerning thousands of mesothelioma claims against Garlock and the amounts

Garlock paid to resolve those claims, to prepare her estimate of Garlock’s liability for pending

and future mesothelioma claims.412

122. Dr. Rabinovitz forecasted that approximately 26,000 pending and future

mesothelioma claims will be brought against Garlock.

413 She estimated that the amount of

money that Garlock will need to resolve those claims is approximately $1.217 billion net present

value in her adjusted indemnity case to $1.292 billion net present value in her preferred base

case, including defense costs.414 Exclusive of defense costs, Dr. Rabinovitz’s estimate is

between $913.4 million and $969.5 million.415

412 Hr’g Tr. 4169:10-11, 4202:17-19, 4203:15-21, 4216:7-10, 4216:21-4217:11, 4223:22-24, Aug. 9, 2013 (Rabinovitz).

413 Id. at 4169:23-4170:2. 414 Id. at 4222:21-23. 415 Id. at 4293:10-19.


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123. Dr. Rabinovitz’s estimation methodology consisted of six steps. First, Dr.

Rabinovitz estimated the size of the population exposed to asbestos.416 This projection was based

on the Nicholson-KPMG model, which has been accepted by courts and is an adjustment to the

original Nicholson model.417

124. Dr. Rabinovitz then estimated the proportion of persons exposed to asbestos who

will develop mesothelioma.

418 Dr. Rabinovitz used the Nicholson-KPMG model’s projections of

mesothelioma mortality for her estimate.419 She estimated that in excess of 27,000 individuals

will contract mesothelioma in the future but testified that the actual number may be higher given

that people are living much longer than in the past, when the Nicholson-KPMG model was

created.420

125. Dr. Rabinovitz next forecasted the percentage of the population that is likely to

file mesothelioma claims against Garlock in the future, known as the propensity to sue.

421 She

did so by dividing the number of mesothelioma claims filed against Garlock during the

calibration period by the number of mesothelioma deaths predicted by the Nicholson-KPMG

model for those same years, resulting in a 79.1 percent claiming rate / propensity to sue.422

416 Id. at 4173:25-4174:5.

Dr.

Rabinovitz testified that in recent years, the propensity to sue Garlock was even higher, which is

a trend that may occur in the future given that Garlock manufactured and sold asbestos-

417 Id. at 4174:13-14, 4174:25-4176:1. 418 Id. at 4178:14-21. 419 Id. at 4178:25-4179:6. 420 Id. at 4176:24-4177:6, 4187:3-13; FCR-42, at 22 (Rabinovitz Demonstrative PowerPoint). 421 Hr’g Tr. 4180:11-16, Aug. 9, 2013 (Rabinovitz). 422 Id. at 4180:14-4181:14.


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containing products through 2001.423 To establish an estimate of the number of future

mesothelioma claims that will be filed against Garlock, Dr. Rabinovitz then multiplied the

propensity to sue by the number of mesothelioma deaths projected by the Nicholson-KPMG

model in each future year.424

126. Dr. Rabinovitz valued Garlock’s pending and future mesothelioma claims by

calculating the average indemnity value during a five-year calibration period from 2005 to

2010.

425 Dr. Rabinovitz testified that this five-year calibration period was appropriate because

(a) Garlock’s payment rates changed in 2005, evidencing that Garlock went into a different mode

of handing cases;426 (b) the five-year period before Garlock’s bankruptcy reflects the future in

that Garlock’s insulator co-defendants were no longer paying claims in the tort system and

bankruptcy trusts were paying claimants on a regular basis, both of which trends are here to

stay;427 (c) the guidelines set forth in In re Eagle-Picher Industries, Inc., 189 B.R. 681, 691

(Bankr. S.D. Ohio 1995), provide that estimators should use a debtor’s most recent history,

adjusted for any major changes that occurred in that period;428 (d) Garlock’s recent claims

history takes into account all of the events that have occurred up to that point, including potential

defenses, and places a value on them;429

423 Id. at 4215:4-9; FCR-42, at 24 (Rabinovitz Demonstrative PowerPoint).

(e) beginning in 2006, the amount of money paid by

424 FCR-42, at 22, 24, 28 (Rabinovitz Demonstrative PowerPoint). 425 Hr’g Tr. 4186:1-5, Aug. 9, 2013 (Rabinovitz). 426 Id. at 4182:10-4183:7. 427 Id. at 4185:5-15, 4210:4-8. 428 Id. at 4184:7-23; Hr’g Tr. 4300:20-4301:14, Aug. 12, 2013 (Rabinovitz). 429 Hr’g Tr. 4185:2-15, Aug. 9, 2013 (Rabinovitz).


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bankruptcy trusts increased greatly;430 and (f) the majority of the future claims against Garlock

fall between 2010 and 2020, supporting the use of a recent calibration period.431

127. For her preferred base case estimate, Dr. Rabinovitz calculated Garlock’s average

settlement payment during the five-year period and then factored in the pay rate to account for

the unpaid claims, resulting in an average indemnity value of approximately $39,700.

432 For her

adjusted indemnity estimate, Dr. Rabinovitz calculated a weighted average indemnity value of

approximately $38,500, which recognizes that (a) claims pending for six or more years may be

resolved without payment, and (b) increases in claimant age and the year of first exposure to

asbestos will reduce future growth in average indemnity payments.433

128. Dr. Rabinovitz also estimated the values of 246 settled-but-not-paid claims and

181 disputed settlement claims as placeholders to ensure that this class of claims was not

overlooked or undervalued during the bankruptcy proceedings.

434 Dr. Rabinovitz estimated

these claims at approximately $20.3 million net present value and emphasized that precise

amounts for these claims must be determined before the formation of a § 524(g) trust.435

129. Dr. Rabinovitz estimated the cost of defending asbestos claims. Defense costs

were estimated by calculating the defense cost share percentage of mesothelioma and lung

cancer indemnities (34 percent), and then applying that percentage to pending and future liability

430 Hr’g Tr. 4317:2-9, Aug. 12, 2013 (Rabinovitz). 431 Hr’g Tr. 4187:24-4188:3, Aug. 9, 2013 (Rabinovitz). 432 Id. at 4186:7-15; FCR-42, at 25 (Rabinovitz Demonstrative PowerPoint). 433 Hr’g Tr. 4170:17-4172:7, Aug. 9, 2013 (Rabinovitz). 434 Hr’g Tr. 4189:5-4190:22, 4200:19-25, Aug. 9, 2013 (Rabinovitz). 435 Id. at 4189:24-4190:14; FCR-42, at 18 (Rabinovitz Demonstrative PowerPoint).


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estimates.436 Dr. Rabinovitz testified that she included defense costs in her estimate because (a)

defense costs were an integral part of Garlock’s prepetition decision making;437 (b) defense costs

must be considered when determining Garlock’s solvency;438 (c) estimates of defense costs are

always included in SEC filings;439 and (d) defense costs act as a proxy for trust administration

expenses, ensuring that trust administration costs will not come from the trust corpus.440

130. Finally, using information from the Congressional Budget Office provided by the

FCR’s financial advisor, Mr. Joseph Radecki, Dr. Rabinovitz adjusted the future mesothelioma

claims for inflation, applying a rate of between 1.0 percent and 2.3 percent (depending on the

year) for her base case and between .50 percent and 1.8 percent (depending on the year) for her

adjusted indemnity case.

441 Dr. Rabinovitz then applied a risk-free discount rate of 2.81 percent,

which was also provided by Mr. Radecki and was based on yields in the market for U.S.

Treasuries, to determine the net present value of the claims as of the petition date.442

436 Hr’g Tr. 4191:13-4192:13, Aug. 9, 2013 (Rabinovitz).

437 Id. at 4194:18-22; Hr’g Tr. 4292:11-14, 4297:7-13, Aug. 12, 2013 (Rabinovitz). 438 Hr’g Tr. 4194:22-4195:1, Aug. 9, 2013 (Rabinovitz); Hr’g Tr. 4292:15-16, Aug. 12, 2013 (Rabinovitz). 439 Hr’g Tr. 4195:1-3, Aug. 9, 2013 (Rabinovitz); Hr’g Tr. 4292:15-16, Aug. 12, 2013 (Rabinovitz). 440 Hr’g Tr. 4195:12-24, Aug. 9, 2013 (Rabinovitz); Hr’g Tr. 4294:18-25, Aug. 12, 2013 (Rabinovitz). 441 Hr’g Tr. 4195:25-4196:9, Aug. 9, 2013 (Rabinovitz); FCR-42, at 34 (Rabinovitz Demonstrative PowerPoint). 442 Hr’g Tr. 4195:25-4196:9, 4197:7-24, Aug. 9, 2013 (Rabinovitz).


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131. Dr. Rabinovitz’s methodology, like Dr. Peterson’s very similar approach, has

been widely used in both legal and financial contexts. It is also tested, both in Dr. Rabinovitz’s

SEC reporting work and in bankruptcy cases.443

132. Dr. Bates raised a number of criticisms of Dr. Rabinovitz’s opinion, which Dr.

Rabinovitz addressed at the Hearing:

• Dr. Bates criticized Dr. Rabinovitz for not relying on Garlock’s personal injury

questionnaires. Dr. Rabinovitz, however, testified that she reviewed a sample of

questionnaires, which contained inconsistent information, and chose to rely on the

Garrison Database, which she considers the “gold standard” for claims information.444 In

addition, in assuming that 46 percent of all present and future claims will receive zero

payment in her base case (and 60 percent in her adjusted indemnity case), Dr. Rabinovitz

stated that she already factored in the dismissals and other issues that Garlock alleges it

identified in the personal injury questionnaires.445

• Dr. Bates said that Dr. Rabinovitz assigned incorrect payment years to several large

payments. Dr. Rabinovitz explained that she chose to use the most recent claim closing

date when multiple dates were found in the Garrison Database because the most recent

date best reflects the actual value.

446

443 Id. at 4223:8-11.

She further testified that her estimates were not

444 Id. at 4168:23-4169:11; accord id. at 4202:24-4203:14, 4204:8-4204:13; Hr’g Tr. 4351:9-18, Aug. 12, 2013 (Rabinovitz). 445 Hr’g Tr. 4206:18-4207:2, Aug. 9, 2013 (Rabinovitz). 446 Id. at 4201:12-4202:10; Hr’g Tr. 4332:18-23, Aug. 12, 2013 (Rabinovitz).


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affected by that decision since each claim identified by Dr. Bates as having an allegedly

incorrect payment year was within her five-year calibration period.447

• Dr. Bates stated that Dr. Rabinovitz incorrectly assumed that all pending claims are

resolved in 2010 and all future claims are resolved in the same year as they are

diagnosed, which resulted in payments being made in earlier years and not being

discounted enough. Dr. Rabinovitz testified, however, that she made those assumptions

to simplify her calculation and they had no significant impact on her estimate.

448

• Dr. Bates asserted that Dr. Rabinovitz incorrectly valued Garlock’s pending claims by

not considering the age of pending claims, i.e., that claims pending for longer settle for

less. Dr. Rabinovitz testified that she accounted for that issue by assuming that 46

percent of claims in her base case and 60 percent of claims in her adjusted indemnity case

would not be paid.

449 She further noted that Garlock’s data did not demonstrate that

average resolution amounts necessarily decreased based on the age of the claims.450

• Dr. Bates claimed that Dr. Rabinovitz applied the average settlement from the

calibration period to the pending claims but failed to recognize that those claims are in

jurisdictions where claimants received lower settlements. Dr. Rabinovitz explained that

jurisdiction is one of many factors that could be considered, many of which cancel each

other out; that she prefers to work with as much data as possible; and, therefore, relies on

averages from thousands of claims rather than segregating certain jurisdictions for

447 Hr’g Tr. 4202:11-4202:16, Aug. 9, 2013 (Rabinovitz); Hr’g Tr. 4332:11-17, 4332:24-4333:2, Aug. 12, 2013 (Rabinovitz). 448 Hr’g Tr. 4205:4-4206:8, Aug. 9, 2013 (Rabinovitz). 449 Id. at 4206:18-4207:2. 450 Id. at 4207:6-9.


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analysis; and that claims frequently change venue, making it inappropriate to focus on the

jurisdiction of claims in an estimate.451

• Dr. Bates argued that Dr. Rabinovitz failed to take into account a trend showing that

more and more claimants against Garlock are filing their Trust claims earlier. Dr.

Rabinovitz testified, however, that asbestos trusts have a long history of paying claims

and, therefore, Garlock and plaintiffs’ attorneys were aware of trusts and accounted for

them when settling claims.

452 Thus, Dr. Rabinovitz stated that any trust effects are

already reflected in Garlock’s historical claims experience.453

• Dr. Bates maintained that Dr. Rabinovitz incorrectly included defense costs in her

estimate. Dr. Rabinovitz testified that she had a number of important reasons for doing

so: (a) defense costs were an integral part of Garlock’s decision-making, as argued by Dr.

Bates; (b) defense costs are a necessary factor to consider when determining Garlock’s

solvency; (c) estimates of defense costs are always included in SEC filings; and (d)

defense costs act as a proxy for trust administration expenses.

454

• Dr. Bates argued that that Dr. Rabinovitz mistakenly included pre-petition settlement

amounts in her estimate. Dr. Rabinovitz testified that she estimated the values of settled-

but-not-paid and disputed claims as placeholders to ensure that class of claims was not

overlooked or undervalued.

455

451 Id. at 4208:17-25, 4209:1-15.

452 Id. at 4210:4-6, 4212:2-8. 453 Id. at 4210:6-8. 454 Id. at 4194:16-4195:24; Hr’g Tr. 4292:11-16, 4294:18-25, 4297:7-13, Aug. 12, 2013 (Rabinovitz). 455 Hr’g Tr. 4188:25-4190:22, Aug. 9, 2013 (Rabinovitz); Hr’g Tr. 4200:16-4201:2, Aug. 12, 2013 (Rabinovitz).


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• Finally, Dr. Bates argued that Dr. Rabinovitz erred by using inconsistent methodologies

to estimate different classes of pending claims. Dr. Rabinovitz explained that the

methods she used to value pending, settled-but-not-paid, and disputed claims are

consistent with the available data for each group of claims: (a) pending claims were

valued using average indemnity values for Garlock claims closed during the calibration

period; (b) settled-but-not-paid claims were valued based on Garlock’s discovery

responses; and (c) disputed claims were valued based on information provided by

Garlock or, if no information was available, on average indemnity payments paid to law

firms with disputed claims.456

iii. Dr. Charles Bates

133. Dr. Bates provided two estimates. The first used a novel methodology that

differed from the standard method used by Drs. Peterson and Rabinovitz. The method does not

use Garlock’s history of resolving asbestos cases, but instead purports to determine how the

cases would be resolved in hypothetical trials under a set of assumptions that are different from

the existing tort system.

134. First, for present claims, Dr. Bates analyzes 367 jury verdicts found in news

reports to see how they differed based on three variables—whether a plaintiff was alive or dead,

the age of the plaintiff, and the state the plaintiff lived in—and then applies those results to

forecast what a jury would award of each of Garlock’s 3,932 pending mesothelioma claims if it

were tried to verdict against all defendants.457

456 Hr’g Tr. 4186:6-15, 4188:25-4189:21, Aug. 9, 2013 (Rabinovitz).

457 Hr’g Tr. 3908:2-3909:3, Aug. 8, 2013 (Peterson).


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135. Dr. Bates then values at zero 1,755 of these pending claims based upon

assumptions about who, in his view, has a viable claim based on his review of Mesothelioma

Claim Questionnaire responses.458

136. Next, Dr. Bates purports to eliminate the liability share he thinks should be borne

by solvent co-defendants and bankruptcy trusts. Dr. Bates derives this share by assuming that

any mention of another company in the questionnaire or elsewhere in discovery materials, trust

claims, bankruptcy balloting materials, or Rule 2019 statements was sufficient for a “verdict”

and allocates that company an equal share of liability in the trial.

459 Dr. Bates finds 35 such

entities, meaning that Dr. Bates divides his predicted verdict by 36, leaving Garlock with 1/36th

of the liability of every case and eliminating 97 percent of liability.460

137. Finally, Dr. Bates decides what fraction of cases plaintiffs would win. To derive

this win percentage, Dr. Bates relied on data from the 1990s, when plaintiffs won three out of 36

cases that went to trial against Garlock.

461 With this step, Dr. Bates eliminates another 92

percent of Garlock’s liability for pending claims.462

138. Dr. Bates uses essentially the same methodology for future claims, although he

simply eliminates a third of his 28,402 predicted future mesothelioma incidences based on his

assumption that, in those cases, the claimants’ mesotheliomas would not be related to

458 Id. at 3909:13-3910:1. 459 Id. at 3910:6-3911:17. 460 Id. at 3911:10-12, 15-23. 461 Id. at 3911:24-3912:8. 462 Id. at 3912:8-11.


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asbestos.463

139. Dr. Bates’ novel method is problematic in several respects.

That assumption is not widely shared among experts in the field, and Dr. Bates

offers no persuasive rationale or substantiation for it.

140. First, it is unrealistic. It assumes every case Dr. Bates deems viable will be tried

to verdict. Dr. Bates’ present and future analysis contemplates almost 19,000 mesothelioma

trials.464 But, in its entire history, Garlock has tried only 83 mesothelioma claims to verdict in

the last 20 years, less than one-half of one percent of such claims asserted against it.465 Clearly,

Dr. Bates’ method posits a grossly unrealistic number of trials.466 Second, Dr. Bates assumes

that no one, neither Garlock nor any other defendant in these trials, settles, when in fact both

Garlock and most other defendants settle, rather than running the risks of trial.467 Finally Dr.

Bates assumes that all exposure information in the case comes from the plaintiff when its own

counsel have testified that they took steps to discover exposure information elsewhere.468

141. Next, Dr. Bates’ conclusion that liability for verdicts would be split evenly 36

ways, and therefore Garlock would pay only 1/36th of any verdict, is wrong for several reasons.

These

premises do not reflect the way that asbestos personal injury cases are brought, tried, or resolved

in the tort system.

463 Id. at 3913:9-3914:14; Hr’g Tr. 4840:1-3, Aug. 22, 2013 (Bates). 464 Id. at 3908:2-3909:25; Hr’g Tr. 2973:15-2974:4, Aug. 5, 2013 (Bates); Hr’g Tr. 4840:19-25, Aug. 22, 2013 (Bates). 465 ACC-519. 466 Garlock’s own management admitted that it would not have been possible for Garlock to try every case in the tort system because, even though Garlock had “more trial teams at the end than any other defendant in litigation,” it “wouldn’t have the trial teams to do it,” and because “[t]he judges would not give you trial time to try the cases physically.” O’Reilly Dep. 108:22-109:2, Feb. 2, 2013. 467 Hr’g Tr. 2918:22-2919:14, Aug. 5, 2013 (Bates); Hr’g Tr. 3669:3-16, Aug. 7, 2013 (Rice). 468 Hr’g Tr. 2308:17-25, 2340:1-2344:8, Aug. 1, 2013 (Turlik).


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Dr. Bates did not adequately account for differences among the jurisdiction in the law pertaining

to joint tortfeasors. For example, in many states, under the principles of joint and several

liability, an unsuccessful trial defendant might bear the entire judgment in a mesothelioma case,

and incur the costs and risks of pursuing any contribution claims against other potentially

responsible actors. “Hybrid” states recognize joint and several liability in some situations but

only several liability in other. Dr. Bates indulges in a dubious assumption in supposing that

Garlock’s potential liability would be several in all such states. In New York, for example, a

jury in a mesothelioma case found Garlock reckless,469 a determination that held it liable for 100

percent of the plaintiffs’ damages despite what in general is a comparative scheme in that

state.470 Dr. Bates admitted that he did not present in his expert report or direct testimony the

results of any calculations under these various scenarios.471

142. Dr. Bates’ calculation that Garlock would share a verdict with 35 other entities

also assumes that the average verdict would be against Garlock, 13 other solvent co-defendants

and 22 bankrupt entities, or trusts.

472

469 ACC-404. Although that verdict was ultimately overturned, the appellate ruling did not address the finding of recklessness. See In re Eighth Judicial Dist. Asbestos Litig. (Reynolds v. Amchem Prods., Inc.), 32 A.D.3d 1268 (N.Y. App. Div. 2006), rev’d, 872 N.E.2d 232 (N.Y. 2007). Verdicts returned just days before the hearing show that the prospect of a recklessness finding remains a serious risk to defendants who try mesothelioma claims in New York. See ACC-750a at 8 (finding that Cleaver Brooks acted with “reckless disregard”); ACC-750b at 9 (same as to Cleaver Brooks and Burnham); ACC-750c at 12 (same as to Cleaver Brooks); ACC-750d at 9 (same as to Cleaver Brooks and Burnham).

The method by which Dr. Bates arrives at these numbers

contains errors.

470 Compare Hr’g Tr. 2373:14-2374:22, Aug. 1, 2013 (Turlik); ACC-747. 471 Hr’g Tr. 2935:3-24, Aug. 5, 2013 (Bates). 472 Id. at 2949:2-4.


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143. First, Dr. Bates counts as responsible co-defendants any company referenced in

discovery materials such as interrogatory responses or depositions.473 But such a reference does

not itself establish liability. As Garlock’s own defense counsel confirmed, defendants have the

burden of proving a co-defendant’s liability if they wish to allocate responsibility to that co-

defendant.474 And, on average, Garlock shared its verdicts with less than three co-defendants

during its entire verdict history.475

144. In arriving at his figure of 22 bankrupt entities with which Garlock would share a

verdict, Dr. Bates looked to trust claims he found in questionnaire responses, bankruptcy ballots,

and Rule 2019 statements.

476

145. Just because someone makes a claim to a trust does not mean that the bankrupt

company that formed the trust would have been assessed a share of the verdict in a trial. As the

Committee’s witnesses explained, not every claim to a trust is completed or paid, and many

claims that trusts do pay are paid because of the application of presumptive exposure criteria,

such as site lists, that do not apply in the tort system.

None of these sources, however, can be equated to a share of

liability in the context of a jury verdict.

477

146. Nor do bankruptcy ballots constitute admissions of exposure to products such that

they could “count” as shares in a verdict.

478

473 Id. at 2947:6-17.

They reflect at most a determination by counsel that

a claimant he or she represents might have a claim affected by the bankruptcy plan creating the

474 Hr’g Tr. 2378:6-16, Aug. 31, 2013 (Turlik). 475 Hr’g Tr. 3921:23-25, 3922:17, Aug. 8, 2013 (Peterson). 476 Hr’g Tr. 2950:5-24, Aug. 5, 2013 (Bates). 477 Hr’g Tr. 3709:18-3710:20, Aug. 7, 2013 (Patton). 478 Hr’g Tr. 3682:13-25, Aug. 7, 2013 (Patton).


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trust.479 As plaintiffs’ counsel explained, they generally completed bankruptcy ballots for

claimants if they could not rule out exposure to a bankrupt’s products, a far different standard

than one which would establish liability in a tort suit.480

147. Finally, a law firm’s Rule 2019 statements filed in a bankruptcy case cannot

inform anyone about whether or not the bankrupt would ultimately bear a share of liability for

the plaintiff’s injuries. The 2019 filings are designed to inform the court and other parties of the

identity of a lawyer’s clients when the lawyer acts for multiple entities in a bankruptcy case, not

whether those entities are going to file a claim or participate in any particular way in the case.

481

148. Dr. Bates’ use of an 8.3 percent “win rate” for plaintiffs against Garlock at trial is

also unrealistic because it is based on data from the 1990s. The litigation environment for

Garlock changed dramatically in the 2000s, as mesothelioma cases began to form a larger part of

Garlock’s case mix and plaintiffs developed their case against the company.

482 As a result,

Garlock moved from being a peripheral defendant to a principal defendant.483 The transition

from peripheral defendant to principal defendant is not reversible.484 Indeed, Garlock lost 36

percent of the cases it took to verdict between 2001 and 2010.485

479 Hr’g Tr. 3692:3-3694:7, Aug. 7, 2013 (Patton).

480 E.g., Belluck & Fox 30(b)(6) Dep. (Belluck) 90:4-92:2, Dec. 14, 2012; David Law Firm 30(b)(6) Dep. (Cooper) 50:22-51:6, Feb. 1, 2013; Waters & Kraus 30(b)(6) Dep. (Kraus) 95:15-96:18, Jan. 14, 2013. 481 Hr’g Tr. 3788:5-18, Aug. 8, 2013 (Patton). 482 See section I.B.1, supra. 483 Hr’g Tr. 3793:10-3796:3, Aug. 8, 2013 (Hanly). 484 Hr’g Tr. 3435:10-18, Aug. 6, 2013 (Hanly). 485 Hr’g Tr. 2572:4-16, Aug. 1, 2013 (Magee).


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149. Dr. Bates presented a second estimate of liability under the claims resolution

procedures set forth in the Plan of Reorganization filed by Garlock in late 2011. This estimate is

irrelevant and unhelpful for the present task, which is to measure the overall financial burden of

mesothelioma claims on the estate. The Committee and the FCR assert that the plan may be

unconfirmable for many different reasons.486

150. Second, the estimate is irrelevant because, as a practical matter, Garlock’s plan

will not likely be implemented in its current form. Among other things, the plan contemplates an

injunction pursuant to 11 U.S.C. § 524(g). To obtain § 524(g) protection for Garlock, the plan

must be approved by at least 75 percent of asbestos creditors.

The constituency of asbestos claimants, moreover,

will likely reject the plan as an assault on their rights and will not support it.

487 The asbestos creditors,

however, are unlikely to approve Garlock’s plan as currently drafted.488

151. Finally, at trial Dr. Bates provided an estimate of Garlock’s mesothelioma

liability through 2059 using his pre-bankruptcy methodology, based on Garlock’s own resolution

history.

489 Using that methodology, he estimates a liability range of $330 million to $670

million on a net present value basis.490

486 The Committee filed objections to the disclosure statement arguing that the plan is unconfirmable for a variety of reasons. Objection of the Official Committee of Asbestos Personal Injury Claimants to the Debtors’ Proposed Disclosure Statement, filed January 19, 2012 [Dkt. No. 1808]. The Court has not yet ruled on those objections, but finds that they raise important issues.

487 11 U.S.C. § 524(g)(2)(B)(IV)(bb). 488 Hr’g Tr. 3610:11-3622:16, Aug. 7, 2013 (Rice). 489 Hr’g Tr. 2824:4-2827:15, Aug. 2, 2013 (Bates). 490 Id.


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G. Medical and Science Issues

152. There is a ongoing debate in the medical literature between those that believe

exposure to low dose of chrysotile can cause mesothelioma and those that hold the opinion that

exposure to chrysotile cannot cause mesothelioma except in extremely high doses.491

153. For more than thirty years, manufacturers of chrysotile asbestos products,

including Garlock, have defended lawsuits involving their products by asserting the low dose

chrysotile defense.

492 The “low dose chrysotile defense” addressed in this proceeding was raised

in every mesothelioma case that Garlock faced as a defendant in the tort system.493

154. The low dose chrysotile defense was taken into account in deciding whether and

at what price to resolve mesothelioma cases against Garlock.

494

i. Asbestos Released by Garlock Products

155. As Dr. Longo explained, Garlock’s claim that the asbestos in its gaskets were

“encapsulated” and, therefore, harmless did not hold up once the gaskets were cut or abraded in

any fashion.495 The synthetic rubber binder does not penetrate the asbestos fiber bundles

contained in the manufactured product which contain hundreds, if not thousands, of individual

asbestos fibers. When the product is cut or abraded, the fiber bundles are ripped open, releasing

those individual fibers.496

491 Hr’g Tr. 1048:3-1049:13, 1056:21-1057:6, 1058:2-23, July 25, 3013 (Weill).

492 Hr’g Tr. 3635:24-3636:2, Aug. 7, 2013 (Rice). 493 Hr’g Tr. 3464:7-20, Aug. 7, 2013 (McClain); Hr’g Tr. 3087:21-3088:10, Aug. 5, 2013 (Magee). 494 Hr’g Tr. 1385:17-1386:4, July 26, 2013 (Magee); Hr’g Tr. 3122:6-14, Aug. 5, 2013 (Magee); Hr’g Tr. 2531:2-9, Aug. 1, 2013 (Turlik). 495 Hr’g Tr. 1478:6-23, July 29, 2013 (Longo). 496 Id. at 1479:10-23.


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156. The actual concentrations of asbestos dust measured during fabrication and

removal of asbestos gaskets ranged widely from Mr. Boelter’s “non-quantifiable” values of less

than .007 f/cc,497 to Mr. Liukonen’s 0.13 f/cc for hand scraping with no controls,498 to the 1.3

f/cc average for the MAS fabrication studies,499 to the MAV fabrication range of 2.2 to 2.3

f/cc,500 to Dow Chemical’s 2 to 5 f/cc range for cutting gaskets,501 to the Industrial Hygiene

Foundation study’s finding of 4.58 f/cc for removing a Garlock sheet gasket,502 to the MAS

range for removal by a wire brush powered by an electric drill of 15 to 31 f/cc,503 to the Dow

Chemical power wire brush removal of 18 f/cc,504 to the Shell Oil Company power wire brush

removal of 28.4 f/cc.505

157. The specific level of airborne asbestos dust generated from work with gaskets and

packing fluctuates due to the many variables associated with that work including the size of the

flange, the type of gasket used—full face or ring, the method used to remove the gasket, the

thickness of the gasket and the temperature of the system in which the gasket was encased.

506

497 Hr’g Tr. 674:24-25, July 24, 2013 (Boelter).

498 Hr’g Tr. 584:5-8, July 24, 2013 (Liukonen). 499 Hr’g Tr. 1475:6-13, July 29, 2013 (Longo). 500 Id. at 1476:10-13. 501 Hr’g Tr. 921:24-922:2, July 25, 2013 (Henshaw). 502 Hr’g Tr. 1514:11-24, July 29, 2013 (Longo). 503 Id. at 1499:14-1500:10. 504 Id. at 1521:21-1522:2. 505 Hr’g Tr. 604:4-605:6, July 24, 2013 (Liukonen). 506 Hr’g Tr. 1505:5-1507:4, July 29, 2013 (Longo).


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158. However, the primary factor that dictates the level of asbestos dust generated by

the removal of Garlock gaskets is the amount of residue that is left on the flange after the gasket

is scraped off.507

159. In the MAS studies, for example, the concentration of asbestos dust measured

during power wire brushing ranged from 0.4 f/cc when the gasket simply fell out and for the

most part remained intact, to 21 f/cc when the gasket was tightly adhered.

508 Accordingly, the

difference in the results of Dr. Longo’s studies and those of Mr. Boelter is readily explained by

the fact that the gaskets removed by Mr. Boelter were removed intact with little residue while

those in the MAS studies were tightly adhered to the flange face necessitating the removal of

substantial gasket residue by mechanical means.509

160. Regarding which set of measurements is more reliable, Mr. Shoemaker’s

testimony was helpful. He testified about his experience observing and supervising thousands of

shipyard workers who fabricated, installed and/or removed asbestos-containing sheet gaskets and

packing, the sequencing of activities that would take place during the overhaul of Naval vessels,

as well as the safety controls and regulations pertaining to asbestos gaskets and insulation.

510

507 Id. at 1496:16-1497:4.

He

confirmed that Dr. Longo’s videotapes depicting the tools and methods pertaining to the

fabrication and removal of asbestos sheet gaskets were substantially similar to the ways in which

508 Id. at 1504:13-1505:4. 509 Hr’g Tr. 742:12-744:14, July 24, 2013 (Boelter), Hr’g Tr. 1494:23-1495:8, 1504:23-1505:4, 1522:14-1523:10, 1528:4-12, July 29, 2013 (Longo). 510 Hr'g Tr. 1641:19-1648:11, 1669:13-1670:25, 1685:3-1688:5, July 29, 2013 (Shoemaker).


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asbestos gaskets were fabricated and removed by real-world workers in the shipyard and aboard

ships during overhauls.511

161. Regardless of where on the spectrum of exposures such a worker’s task falls, he

or she will still be exposed to an amount of asbestos that well exceeds background levels. In

fact, the potential inhalation of asbestos from the low end of occupational exposures to gaskets

and packing is nearly a thousand times higher than any ambient air levels.

162. For example, one day working in an environment with a concentration of 0.1 f/cc

would lead to the potential inhalation of 384,000 fibers compared to a single day’s worth of

ambient air exposure that would only amount to 432 fibers.512

163. At the higher levels of exposure caused by the removal of gaskets by power wire

brushing, it would only take 41 minutes of that activity to inhale a lifetime’s worth of asbestos at

ambient air concentrations.

513

ii. Exposure to Other Asbestos Products

164. Garlock presented videos of testing conducted by Dr. Boelter which purported to

show how removal of asbestos-containing insulation material was necessary prior to replacing a

gasket.514

165. The Court declines to find that such procedures were historically accurate.

166. Mr. Shoemaker testified that asbestos thermal insulation was replaced by

fiberglass substitutions in the mid-1960s and asbestos-containing thermal insulation was phased

511 Id. at 1671:10-14, 1679:3-11. 512 Hr’g Tr. 484:4-485:18, July 23, 2013 (Sporn). 513 Hr’g Tr. 1752:6-1753:13, July 30, 2013 (Templin). 514 Hr’g Tr. 659:1-661:19, July 24, 2013 (Boelter).


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out entirely in the 1970s.515 He explained that insulation pads or “portable pads,” ones that could

be easily removed and reused, were typically used on equipment such as flange pumps and

valves.516 He also contended that pipefitters and machinists would not have used a hammer to

remove pipe insulation because this could have damaged the various pipe components.517

iii. Effects of Exposure to Asbestos from Garlock Products.

167. Whether the inhalation of asbestos dust generated from the fabrication and

removal of Garlock gaskets is sufficient to cause or contribute to the development of

mesothelioma is a medical question.

168. If the Court were to decide the question of whether exposure to asbestos from the

Garlock’s asbestos-containing products can cause or contribute to mesothelioma, it would

conclude that it does.

169. The Committee’s medical experts persuasively rebutted the opinions of Garlock’s

medical experts that exposure to chrysotile asbestos dust and fibers from the use of Garlock

gaskets and packing was incapable of causing mesothelioma. Well supported by a voluminous

body of scientific literature, the Committee’s medical experts testified that: 1) chrysotile asbestos

causes mesothelioma;518 2) there is no safe level of exposure to any type of asbestos, including

chrysotile;519 3) exposures to asbestos as brief as a few days can cause mesothelioma;520

515 Hr’g Tr. 1679:12-1680:16, July 29, 2013 (Shoemaker).

4)

516 Id. at 1682:9-1684:1. 517 Id. at 1684:2-25. 518 Hr’g Tr. 1989:14-1990:1, July 30, 2013 (Brodkin); Hr’g Tr. 2111:8-12, 2128:2-18, July 31, 2013 (Welch). 519 Hr’g Tr. 1948:25-1949:21, July 30, 2013 (Brodkin); Hr’g Tr. 2128:19-2129:6, July 31, 2013 (Welch). 520 Hr’g Tr. 2122:2-2123:25, July 31, 2013 (Welch).


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mesothelioma is caused by the cumulative amount of asbestos exposure, and that the more a

person is exposed the greater the risk;521 and 5) asbestos exposures from fabricating and

removing asbestos gaskets can result in concentrations of asbestos that are well in excess of what

is found in background ambient air.522

170. Dr. Brodkin explained how the medical evidence established a casual relationship

between the use of gaskets and packing and the development of mesothelioma through the use of

the Bradford Hill causation criteria, first with regard to chrysotile and then specifically with

regard to the fabrication and removal of asbestos gaskets.

523 He concluded that chrysotile

asbestos in gaskets and packing is a potent risk factor for mesothelioma.524

171. Next, Dr. Brodkin explained the methodologies he used in determining that

exposure to chrysotile asbestos dust from gaskets and packing causes mesothelioma.

525 These

included three complementary methodologies: (1) taking a comprehensive occupational and

environmental history; (2) applying the Helsinki Consensus criteria on attribution; and (3)

evaluating the Bradford-Hill causation criteria.526

172. With regard to an individual’s occupational history, the information for those who

have worked with gaskets and packing is that any exposures that were generated from the

disturbance of asbestos fibers like scraping, cutting, wire brushing, and power wire brushing,

521 Hr’g Tr. 1948:6-24, 2004:9-19, July 30, 2013 (Brodkin); Hr’g Tr. 2148:4-2152:11, July 31, 2013 (Welch). 522 Hr’g Tr. 1748:4-1753:13, July 30, 2013 (Templin). 523 Hr’g Tr. 1951:5-1954:9, 1957:17-1958:1, 1961:1-21, 1967:7-1968:25, 1970:1-23, 1970:24-1971:22, 1973:1-16, 1979:7-1984:6, July 30, 2013 (Brodkin). 524 Id. at Tr. 1989:14-1990:1. 525 Id. at 1935:4-9. 526 Id. at 1935:10-1936:2.


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which can result in very significant airborne asbestos fiber levels.527 According to Dr. Brodkin,

for those individuals who have a defined occupational exposure to an activity generating

airborne asbestos fibers, the Helsinki Consensus criteria would allow a physician to make a

determination of causation, as long as that activity occurred more than ten years prior to the

diagnosis of mesothelioma.528

173. Dr. Brodkin also discussed the evidence that supported his conclusion that the

application of the Bradford-Hill causation criteria demonstrated a causal relationship between

exposure to chrysotile and mesothelioma.

529 This included (1) the numerous studies that have

shown a consistent increased risk of mesothelioma in cohorts exposed to predominately

chrysotile fibers;530 (2) the fact that the disease of mesothelioma does not occur until years after

the exposure to chrysotile asbestos fulfills the temporality requirement;531 (3) the many studies

of chrysotile exposure that show increasing incidence of mesothelioma at greater doses like those

of Rogers and Lee and Madkour in Egypt which meets the dose-response consideration;532 (4)

Dr. Brody’s testimony, which addressed the considerations of biological plausibility and animal

study support;533 (5) the fact that mesothelioma is a signal tumor caused almost exclusively by

exposure to asbestos satisfies the specificity consideration;534

527 Id. at 1940:12-1941:14.

and (6) the fact that all types of

asbestos are responsible for causing pleural plaques, non-cancerous scarring of the pleura, and

528 Id. at 1950:7-1951:4. 529 Id. at 1951:5-1952:23. 530 Id. at 1952:24-1954:9, 1957:17-1958:1. 531 Id. at 1960:9-25. 532 Id. at 1961:1-21, 1967:7-1968:25. 533 Id. at 1970:1-23. 534 Id. at 1970:24-1971:22.


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lung cancer, without any potency difference, fulfills the considerations of coherence and

analogy.535

174. Applying these same considerations to gasket and packing exposures, Dr. Brodkin

noted studies documenting cases of mesothelioma in workers who were engaged in gasket

manufacturing.

536 Such studies included an evaluation of the MacNeal-Chicago registry which

discovered cases of mesothelioma not only among plant workers but in individuals who lived in

close proximity to the manufacturing plant. Another study of a chrysotile packing plant revealed

17 cases of mesothelioma among its 3,000 employees, a high percentage for a disease that occurs

at a rate of one in a million in the general population.537

175. Dr. Brodkin testified that further evidence of the connection between asbestos

gasket and packing use and mesothelioma is found in the epidemiologic studies performed with

the various trades that utilized these products including pipefitters, plumbers, boilermakers,

machinists and mechanic repairmen.

538 Dr. Brodkin testified that numerous studies of these

trades consistently demonstrated a significantly elevated risk of contracting mesothelioma.539

176. In evaluating the levels of exposure to gaskets and packing, Dr. Brodkin

recognized that degraded gaskets can become friable and a source of airborne fibers and, thus,

exposure.

540

535 Id. at 1973:1-16.

Since the medical literature uniformly reports the lack of a known threshold of

exposure below which mesothelioma does not occur, Dr. Brodkin emphasized the need to reduce

536 Id. at 1979:7-12. 537 Id. at 1979:13-1980:15. 538 Id. at 1980:16-1981:19. 539 Id. at 1981:20-1984:6. 540 Id. at 1984:20-1985:4.


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or prevent exposure to lower the risk of disease.541 He noted that the governmental permissible

exposure limits were designed as a practical lower limit of feasibility for measuring asbestos

levels, not a measure to prevent the occurrence of mesothelioma.542

177. Dr. Welch testified that more than a dozen epidemiology studies conducted all

over the world show an increased risk of mesothelioma in cohorts of people exposed to

chrysotile asbestos.

543 Among the cohorts of chrysotile exposed workers she discussed were a

series of papers relating to textile workers in China with an increased risk of mesothelioma

thirty-three (33) times greater than that of the non-exposed population;544 miners, millers and

other workers at a large open air chrysotile mine in Balangero, Italy who had a statistically

significant excess incidence of mesothelioma not attributable to other mineral contaminants;545

and a group of workers in a North Carolina textile mill where eight mesothelioma cases occurred

in an environment where only two air samples out of 38,000 demonstrated the presence of a

commercial amphibole fiber.546

178. With regard to fiber potency, Dr. Welch testified that many of the studies used to

calculate potency differences are out of date and contain more mesothelioma cases in the

chrysotile exposed cohorts than when they were studied in the late 1990s,

547

541 Id. at 1985:5-1986:3.

and that in 2008, a

Science Advisory Board convened by the Environmental Protection Agency to quantify the

542 Id. at 1986:4-1987:12. 543 Hr’g Tr. 2113:6-2114:18, 2117:4-9, July 31, 2013 (Welch). 544 Id. at 2117:10-2118:2. 545 Id. at 2118:3-18. 546 Id. at 2118:19-2121:11. 547 Id. at 2145:4-2146:5.


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differences in fiber types determined that the historical data was not sufficient to conclude that

chrysotile asbestos was less potent than amphibole asbestos.548

179. Dr. Welch also testified that, based upon both analytical epidemiology studies and

mesothelioma case series such as the Skammertiz study and the Greenberg Davies study, it has

been demonstrated that asbestos exposures as brief as a few days cause mesothelioma in

humans.

549 With respect to chrysotile specifically, she explained how the Madkour, Pan and

Everatt studies demonstrate that very low levels of chrysotile exposure (such as living a mile

away from a chrysotile plant or a cumulative exposure of 0.01 fiber per cubic centimeter) cause

mesothelioma.550

180. The literature supporting the view that chrysotile asbestos causes mesothelioma is

extensive, and every scientific organization that has studied the issue has concluded that there is

a causal relationship between chrysotile asbestos and mesothelioma.

551

181. Dr. Brody confirmed that all asbestos fibers types, including chrysotile, have been

shown to cause mesothelioma as well as all other asbestos-related disease in humans.

552 Dr.

Brody testified that inhaled asbestos fibers have the ability to damage the genetic composition of

cells.553 Wherever asbestos fibers travel in the human body, they are capable of causing injuries

at the cellular level.554

548 Id. at 2093:3-2094:7, 2095:7-2096:4.

With respect to cancer, however, the greater concern occurs when

549 Id. at 2123:10-25. 550 Id. at 2124:4-2126:17. 551 Hr’g Tr. 1948:10-24, 1973:17-1975:21, July 30, 2013 (Brodkin); Hr’g Tr. 2111:8-2113:6, July 31, 2013 (Welch). 552 Hr’g Tr. 1858:13-22, 1860:1-18, July 30, 2013 (Brody). 553 Id. at 1838:5-15, 1847-1857. 554 Id. at 1853:24-1854:9.


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asbestos fibers change the genetic material within a cell that survives and then passes on these

asbestos-induced genetic errors through cellular division. Over the course of many years, this

genetic damage is compounded and magnified due to additional damage to future generations of

the damaged cell. Cancer develops decades later, when a single cell creating genetic errors in

combination for that person results in a tumor.555 Based on his published studies, Dr. Brody

opined that chrysotile asbestos is cytotoxic to human and animal macrophages and kills cells that

function as a key component of the body’s natural defense mechanism.556

182. To support the low dose chrysotile defense, Garlock offered the testimony of

three medical experts, Drs. David Garabrant, Thomas Sporn and David Weill, none of whom has

a specialty in occupational medicine. Moreover, neither Dr. Sporn nor Dr. Weill has ever

designed or published an original epidemiology study relating to asbestos exposed workers.

557

183. Their opinion that chrysotile asbestos is totally innocuous and incapable of

causing any disease including asbestosis, pleural plaques and mesothelioma is contradicted by

peer-reviewed published literature,

558 and by Garlock’s own Material Safety Data Sheet, which

alerted workers that the chronic breathing of chrysotile asbestos from Garlock’s gaskets could

cause lung disorders such as asbestosis, pleural plaques, lung cancer and mesothelioma.559

555 Id. at 1852:2-1857:25.

556 Id. at 1858:23-1860:4. 557 Hr’g Tr. 443:15-17, July 23, 2013 (Sporn), Hr’g Tr. 1016:15-19, July 25, 2013 (Weill). 558 Hr’g Tr. 425:5-17, 445:16-19, July 23, 2013 (Sporn); Hr’g Tr. 1019:21-1020:6, 1022:2-6, July 25, 2013 (Weill); Hr’g Tr. 2104:3-2105:1; 2106:24-2111:7, July 31, 2013 (Welch). 559 Hr’g Tr. 451:19-452:4, July 23, 2013 (Sporn).


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184. Dr. Garabrant conceded that he is not an expert on translocation of asbestos fibers

from the lung to the pleura nor is he an expert in lung fiber burden analysis.560 Moreover, Dr.

Garabrant conceded that in formulating his opinions in this case, he did not incorporate the

results of any in vitro or animal experiments.561

185. Dr. Garabrant acknowledges that approximately twenty studies of plumbers and

pipefitters, occupations where workers use gaskets, demonstrate a five-fold risk of developing

mesothelioma.

562

186. Dr. Weill holds the opinion that chrysotile asbestos, the type of asbestos that

comprised 95 percent of the asbestos used in the United States, is totally innocuous and

incapable of causing pleural plaques, asbestosis, lung cancer or mesothelioma.

563 He maintains

that the only workers exposed to chrysotile asbestos who are at risk of contracting mesothelioma

are chrysotile miners.564 Dr. Weill conceded that his position is contrary to the conclusions

reached by the Canadian Medical Association, the American Public Health Association, the

American Cancer Society, the World Health Organization, the National Toxicology Program, the

United States Public Health Service and the World Trade Organization.565

187. During cross-examination, Dr. Weill agreed that the use of chrysotile asbestos in

animal inhalation experiments with rats caused mesothelioma.

566

560 Hr’g Tr. 364:8-15, July 23, 2013 (Garabrant).

Dr. Weill further conceded that

561 Id. at 327:20-328:25 (Garabrant). 562 Id. at 293:22-294-9. 563 Hr’g Tr. 1019:21-1020:6, July 25, 2013 (Weill). 564 Id. at 1022:2-6. 565 Id. at 1022:8-1023:3, 1024:13-1025:15. 566 Id. at 1028:8-18.


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in vitro studies have shown that chrysotile asbestos can produce a mutagenic event in cells and

that chrysotile fibers can cause actual DNA strand breakage.567

188. From a physiologic prospective, Dr. Weill agreed that only the asbestos fibers that

get to the pleura are the ones that cause mesothelioma.

568 Given the shorter half-life of

chrysotile asbestos in the lungs, Dr. Weill agreed that researchers have found that the

predominant fiber found in the pleura is chrysotile.569

189. Dr. Weill acknowledged that the issue of whether chrysotile causes mesothelioma

has been the subject of a good-faith debate over the past twenty years both in the peer-reviewed

literature and in the courtroom.

570 He further admitted that there are many qualified researchers

who disagree with his opinions, including Dr. Richard Lemen, a Ph.D. epidemiologist, who

concluded that chrysotile can and does cause mesothelioma after applying the Bradford Hill

causation considerations; Dr. Allen Smith, another Ph.D. epidemiologist, who opined that

exposure to chrysotile is the main cause of pleural mesothelioma; researchers at Mount Sinai,

one of the leading institutions investigating asbestos disease, who concluded that “clinical and

epidemiologic studies have established beyond all reasonable doubt that chrysotile causes cancer

of the lung, malignant mesothelioma of the pleura and peritoneum;” and Dr. Leslie Stayner, yet

another Ph.D. epidemiologist, who published that both the toxicological and epidemiologic

literature strongly support the view that occupational exposure to chrysotile is associated with

increased risk of lung cancer and mesothelioma.571

567 Id. at 1034:8-13.

568 Id. at 1034:14-23. 569 Hr’g Tr. 1036:16-1039:3, July 25, 2013 (Weill). 570 Id. at 1058:2-23. 571 Id. at 1056:7-1057:17; accord id. at 1048:3-1049:13, 1054:18-1055:8.


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II. CONCLUSIONS OF LAW

A. Daubert and Other Evidentiary Issues

190. The Debtors’ Motion to Exclude or Strike Committee Medical Expert Witness

Opinions, filed July 3, 2013 [Dkt. No. 2981], is denied. The Court finds Dr. Welch, Dr. Brody,

and Dr. Brodkin qualified as experts. Although the Court has not ruled on medical issues, the

Court found the testimony helpful and reliable.

191. The Debtors’ Motion to Exclude or Strike Committee Industrial Hygiene Expert

Witness Opinions, filed July 3, 2013 [Dkt. No. 2985], is denied. The Court finds Dr. Longo and

Mr. Templin qualified as experts.

192. The Debtors’ Motion to Exclude or Strike Committee and FCR Estimation Expert

Witness Opinions, filed July 3, 2013 [Dkt. No. 2985], is denied. The Court finds Dr. Peterson

and Dr. Rabinovitz qualified as experts.

193. The exhibits and deposition designations submitted by the Committee and FCR

are hereby admitted.

194. All standing objections raised by Garlock or Coltec at the hearing have been, or

are now, denied.

B. Legal Framework of Estimate

195. The goal of this estimation proceeding is “a reliable and reasonable estimate of

the aggregate amount of money that Garlock will require to satisfy present and future

mesothelioma claims.”572

572 Est. Order ¶ 10.

Consistent with fundamental bankruptcy principles, the Court must


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determine what it would cost Garlock to resolve present and future asbestos claims if they were

not in bankruptcy.573

196. As previously set forth in its Estimation Order, this estimation “for allowance

purposes pursuant to section 502(c).”

574 However, that purpose is qualified in that the Court

“does not expect to ‘allow’ any individual or group of claims. Rather, it proposes to estimate the

aggregate amount necessary to satisfy present and future claims that may be allowed at some

later point in the case.”575

197. This qualification preserves the rights of claimants and recognizes the

jurisdictional limitations of the Court. To conduct allowance proceedings for purposes of

distribution would implicate individual claimants’ due process rights. A bankruptcy court is

precluded from liquidating or estimating contingent or unliquidated personal injury or wrongful

death claims against the estate for purposes of distribution.

576 However, “an estimation of

asbestos liability for the limited purposes of plan formulation is a fruitful endeavor because it

promotes the speed and efficiency goals of the Bankruptcy Code, while not implicating the

procedural rights of the individual claimants.”577

573 See Owens Corning v. Credit Suisse First Boston, 322 B.R. 719, 722 (D. Del. 2005) (“claims are to be appraised on the basis of what would have been a fair resolution of the claims in the absence of bankruptcy”); In re Federal-Mogul Global, Inc., 330 B.R. 133, 158 (Bankr. D. Del. 2005) (object is to determine “what a claim would have been worth but for the bankruptcy”).

574 Est. Order ¶ 9. 575 Id. ¶ 11. 576 28 U.S.C. § 157(b)(2)(B), (b)(5). See also 28 U.S.C. § 1411(a) (preserving in bankruptcy claimants’ right to jury trial of personal injury tort and wrongful death claims). 577 Federal-Mogul, 330 B.R. at 154-55.


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198. The estimation cannot be an exact determination of present or future liability.

“[A]n estimation by definition, is an approximation.”578

199. The evidence is unrebutted that the method Garlock used to resolve mesothelioma

claims in that system was not trial, but rather settlement of those claims supported by a diagnosis

of mesothelioma and evidence that the claimants worked with or around Garlock’s asbestos-

containing products. By such settlements, Garlock converted disputed, unliquidated tort claims

into consensual obligations to pay agreed sums of money.

200. If Garlock remained in the tort system, it would continue to resolve mesothelioma

claims in this manner. Garlock has provided no evidence that would enable the Court to predict

that Garlock’s future in that system would be materially different from its historical experience

in the latter half of the decade of the 2000s.

201. Garlock’s attempt to discredit its claim resolution history as a proper foundation

for aggregate estimation is not persuasive. The Court accepts that Garlock’s claims data and

settlement data, as interpreted by experts in light of Garlock’s claims management practices,

provides a reasonable basis for aggregate estimation.

202. In estimating liabilities where the interests of equity holders are pitted against

those of creditors, the limitations on the accuracy of estimation imply that the Court should be

conservative, that is, that doubts should be resolved in favor of the creditors because their rights

are superior and they are entitled to be paid in full before equity may retain any interest.

Congress enacted the Absolute Priority Rule in 11 U.S.C. § 1129(b) to meet “the danger inherent

578 Federal-Mogul, 330 B.R. at 155. Especially where valuation requires “a prediction as to what will occur in the future, an estimate, as distinguished from mathematical certitude, is all that can be made.” Consol. Rock Prods. Co. v. Du Bois, 312 U.S. 510, 526 (1941). See also Owens Corning, 322 B.R. at 725 (“mathematical precision cannot be achieved”).


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in any reorganization plan proposed by a debtor, then and now, that the plan will simply turn out

to be too good a deal for the debtor’s owners,” and to ensure that debtors and insiders cannot

“use the reorganization process to gain an unfair advantage.”579

C. Estimate of Aggregate Liability for Mesothelioma Claims

203. The methods applied by Dr. Peterson and Dr. Rabinovitz to produce estimates

have previously been adopted by a number of courts estimating liability for asbestos claims.580

204. The Court finds the methods used by Dr. Peterson and Dr. Rabinovitz to be

reliable and appropriate for this estimation.

205. The parties agree that 2.5 percent per annum is a reasonable inflation assumption

for forecasting the value of future claims, and the Court so finds. The discount rates used by Dr.

Peterson and Dr. Rabinovitz are “risk-free” rates as required by applicable precedent.581

Mesothelioma claimants are not investors who should be deemed to accept risk in order to gain a

higher return.582

579 Bank of Am. Nat’l Trust & Sav. Ass’n v. 203 N. LaSalle St. P’ship, 526 U.S. 434, 444 (1999).

The task at hand, moreover, is to measure the aggregate value of payments to

be made on allowable claims, taking into account the time value of money. The discount rates

used by Dr. Peterson and Dr. Rabinovitz are substantially consistent with the discount rate used

in the Bondex case. There, a risk free rate of 3.45 percent was used to discount future liabilities

580 See In re Specialty Prods. Holding Corp., 2013 WL 2177694, at *23 (Bankr. D. Del. May 20, 2013) (“Bondex”); In re Armstrong World Indus., Inc., 348 B.R. 111 (D. Del. 2006); In re Federal-Mogul Global Inc., 330 B.R. 133, 133-34 (D. Del. 2005); Owens Corning, 322 B.R. at 725; In re Eagle-Picher Indus., Inc., 189 B.R. 681, 686-87 (Bankr. S.D. Ohio 1995). 581 Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523, 537-38 (1983) (quoting Chesapeake & Ohio R. Co. v. Kelly, 241 U.S. 485, 491 (1916)). 582 McGraw Report at 4-5.


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back to Bondex’s petition date of May 31, 2010, within two weeks of the equivalent date in this

case.583

206. The Court finds Dr. Bates’ principal method to be unhelpful here because, first, it

estimates Garlock’s liability under conditions that do not correspond to the current tort system.

In addition, the assumptions built into Dr. Bates methodology, such as the number of shares that

a verdict would be divided into and the rate at which plaintiffs would win trials are not

adequately tied to Garlock’s experience in the tort system.

207. Dr. Bates’ secondary method, in which he estimates Garlock’s liability under the

bankruptcy plan it proposed in late 2011, is premature and inappropriate. First, the plan itself

may be unconfirmable as a matter of law.584 Setting that possibility aside, how the asbestos

creditors’ entitlements may be adjusted under a plan of reorganization is an issue that has not yet

been presented. To take into account Garlock’s bankruptcy in estimation now would introduce a

premature discount of the claims. As a general matter, the fact of bankruptcy cannot be used to

reduce the value of the claims faced by the debtor on the petition date.585

583 Bondex, 2013 WL 2177694, at *25.

Consistent with that

principle, in estimating asbestos claims, the law is clear that the Court is to measure the

aggregate amount of the claims in the tort system, not “the value which claimants might take in

584 For example, the Committee filed objections to the disclosure statement arguing that the plan is unconfirmable for a variety of reasons. Objection of the Official Committee of Asbestos Personal Injury Claimants to the Debtors’ Proposed Disclosure Statement, filed January 19, 2012 [Dkt. No. 1808]. The Court has not yet ruled on those objections, but finds that they raise important issues. 585 For example, in a bankruptcy solvency analysis, a company’s bonds must be valued at the face amount of the obligations, not discounted because of the debtor’s financial distress and descent into bankruptcy. In re Trans World Airlines, Inc., 134 F.3d 188, 196-97 (3d Cir. 1998).


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satisfaction of their claims through some bankruptcy mechanism such as a trust of the sort

provided for at § 524(g).”586

208. Dr. Bates’ and Dr. Gallardo-García’s criticisms of the methodologies and

estimates put forward by Dr. Rabinovitz and Dr. Peterson are not persuasive.

D. Medical and Science Issues

209. Whether the foreseeable use of Garlock gaskets generated appreciable dust and

whether that dust is capable of causing mesothelioma are factual questions for a jury to resolve,

not matters to be decided as a matter of law by this Court.587

210. The Court does not need to make determinations on these issues.

211. The strengths and weaknesses of the medical and science defenses are already

priced into historical settlement values, and no further adjustments to the estimation to account

for those defenses are necessary.588

E. Conclusion

212. The Court finds the estimate of Dr. Peterson the most persuasive and therefore

estimates the pending and future mesothelioma claims against Garlock, in the aggregate, at

$1.265 billion in net present value.

SO ORDERED.

___________________________

George R. Hodges, United States Bankruptcy Judge

586 Eagle-Picher, 189 B.R. at 683. 587 Hr’g Tr. 1239:13-1241:9, July 26, 2013 (Brickman); Hr’g Tr. 1058:19-23, July 25, 2013 (Weill). 588 See Federal-Mogul, 330 B.R. at 161-62.


UNITED STATES BANKRUPTCY COURT FOR THE WESTERN … · Leslie M. Kelleher ([email protected]) James P. Wehner (jwehner@capdale) One Thomas Circle, N.W. Washington, DC 20005 . Telephone:

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